Royal Bank of Scotland today reported more credit crunch pain and an 8% drop in underlying earnings so far this year as it outlined plans for its £20 billion Government-backed rescue.
The troubled bank said full year figures would be impacted by rising bad debts and writedowns, which totalled £206 million in the third quarter, on top of £5.9 billion in the first half.
RBS is raising £5 billion under the Government’s part-nationalisation scheme and is appealing for another £15 billion from shareholders under a share placing, which is underwritten by the Government.
It said today a group-wide overhaul was under way and that it hoped to buy back the Government’s £5 billion stake “as soon as it is prudent to do so”.
Dividend payments on hold
Incoming boss Stephen Hester – hired to take over from Sir Fred Goodwin formally later this month – said RBS was aiming to pay back the £5 billion of taxpayer cash before its next dividend decision in early 2010.
Banks financed under the Government’s bank bail-out cannot resume dividend payments until they have bought back the preference share stakes held by the State.
However, it has come under fire over reported plans for staff bonuses, including rewards for those in its stricken investment banking division.
The operation’s losses amid the financial turmoil largely led to the £5.9 billion first half writedown and the group’s first loss in its 40 years as a public company.
RBS said bonuses had yet to be determined, but added it had to be “mindful” of its 170,000 staff.
For more on RBS read our advice piece on the Royal Bank of Scotland being nationalised.