January 19th, 2009
Royal Bank of Scotland Group Plc said it may post a loss of as much as 28 billion pounds ($41 billion), the biggest ever reported by a U.K. company, as the credit crisis worsens. The stock slumped as much as 46 percent.
Britain’s biggest government-controlled bank may post a full-year loss before exceptional goodwill impairments of as much as 8 billion pounds, Edinburgh-based RBS said in a statement today. In addition, the bank may write down the value of past acquisitions by as much as 20 billion pounds.
The loss would eclipse Vodafone Group Plc’s 22 billion- pound net loss in 2006. RBS has been crippled by its acquisition of ABN Amro Holding NV’s investment banking assets three months before the credit crisis began, a takeover Chancellor of the Exchequer Alistair Darling today called “disastrous.” The Treasury said today it may raise its stake in RBS as it announced the second British bank rescue in three months.
“I am angry at the Royal Bank of Scotland and what has happened,” Prime Minister Gordon Brown told reporters in London today. The bank took “irresponsible risks,” in investing in U.S. subprime mortgages and ABN Amro, he said.
RBS shares dropped as low as 18.9 pence and traded down 43 percent at 20 pence at 1 p.m. in London trading, their lowest value since at least September 1988. Barclays Plc dropped 10 percent to 88.2 pence. Lloyds Banking Group Plc dropped 25 percent to 74 pence, as the bank said it still plans to repay the government’s preference shares by the end of the year.
“Full-scale nationalization” is the most likely next step for RBS “if the latest initiative proves insufficient,” Nomura analysts Robert Law and Raul Sinha said in a note to clients today. The bank may be forced to raise more cash from investors, diluting existing shareholders’ stakes, until the full scale of credit losses is known, they added.