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RBS posts profit but bad debts soar

RBS posts profit but bad debts soar

Category: Economy

Updated: 07/08/2009
First Published: 07/08/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The Royal Bank of Scotland Group has announced a pre-tax profit of £15 million in the first six months of 2009, but has written off billions in bad debts during the period.

After tax and paying government dividends, RBS made a loss of more than £1 billion and has warned that results may not improve greatly for at least another two years.

As was the case with Barclays, which posted a pre-tax profit of £3 billion earlier in the week, RBS's investment arm performed well, recording a profit of £5 billion, although shareholders were warned that the division is likely to weaken substantially in the second half of the year.

The group also revealed that it wrote off assets worth £7.5 billion in the first six months of 2009, as bad debt soared. Write offs are 'set to stay high for a while,' RBS chief executive, Stephen Hester warned.

The lender, which is 70 per cent publically owned after a government bailout worth £20 billion, said its core banking operation had performed well, making an operating profit of £6.3 billion, an improvement on the £4.7 billion that was achieved during the same time last year.

Specifically, loans to the value of £36 billion were given to homeowners and businesses, with applications from small firms registering an acceptance rate of 85 per cent.

Mr Hester said that while he was optimistic about RBS's future, the rebuilding process would be one of the largest ever done and there were no miracle cures to be found.

"Overall results may not substantially improve until 2011 and full recovery will take time," he said. "Along the way we will still need the government support that gives us time and strength to restructure."

"We will repay that with results and responsible support to the communities who in turn are supporting us."

The results come in a week when Barclays and HSBC both announced profits of £3 billion, while Northern Rock and Lloyds recorded losses of £724 million and £4 billion respectively.

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