Royal Bank of Scotland Group PLC on Friday reported a half-year loss of 802 million pounds ($1.5 billion), forced deep into the red by 5.9 billion pounds ($11.4 billion) in write-downs as the US subprime credit crisis exacted more pain fully a year after it began. The loss for Britain's second largest bank compared to a fat 3.6 billion pound profit it made in January to June of 2007, the bank's best-ever half-year. It is the first time in 40 years that RBS has posted a loss. Total income also fell over the same period to 13.7 billion pounds ($26.5 billion), from 14.7 billion pounds. The Edinburgh-based bank's results were largely due to 5.9 billion pounds ($11.4 billion) from losses on assets exposed to the credit crisis, which gathered force in August 2007. Many mark its beginning in Europe as a year ago this Sunday, when the European Central Bank was forced to inject an unprecedented ¤95 billion into money markets to free up lending. The bank's writedowns come on top of the 2.6 billion pounds in US subprime mortgages, leveraged loans and bond insurance that the bank wrote off last year. In preparation for these massive reductions, RBS has been busy raising new funds to shore up its reserves over the last six months. In June, the bank raised 12.3 billion pounds ($23.4 billion) in Europe's largest-ever rights issue. The bank called it the largest in British banking history. But further research suggests Lloyds TSB took first prize in 1989 when it was forced to write off colossal levels of bad loans in Latin America. The Lloyds loss was 715 billion pounds on a pre-tax basis, compared to Royal Bank of Scotland's 692 million-pound pretax loss. “The world has changed,” RBS chairman Tom McKillop told investors at the time of the rights issue, adding that the deterioration in credit markets meant the company required more capital than it had chosen to maintain in recent years. RBS has also been shifting non-core assets to raise cash. In June, the bank agreed to sell its European train unit, Angel Trains, to Australian investment fund Babcock and amp; Brown for $7 billion. And, the company has put its insurance businesses up for sale. The fundraising efforts are part of RBS' new strategy - in the wake of the credit crunch - of focusing resources on its core domestic and international banking businesses.
