RBS to cut jobs as profit plunges 63pc
London, November 5, 2011
Royal Bank of Scotland is to further shrink its investment bank arm and cut more jobs after the euro zone debt crisis sliced into third-quarter profit, hampering its turnaround.
RBS, 83 per cent owned by the UK government after it was bailed out during the 2008 financial crisis, yesterday said it expects a tough fourth quarter after it took a further hit on its Greek government bonds and sold most of its Italian bonds.
RBS reported an underlying profit of £267 million ($426m) for the three months to end-September, down 63pc from a year ago. It had a core Tier 1 capital ratio of 11.3pc and a liquidity pool of £170 billion.
Chief executive Stephen Hester said the tough market conditions were making the road to recovery "longer and bumpier than hoped for."
Hester is halfway through a five-year turnaround plan, which has included halving the size of its investment bank, global banking and markets. He has previously said 2,000 more jobs could go in the division.
RBS took a further impairment loss of £142m on its exposure to Greece during the third quarter, marking sovereign bonds there down to 37pc of face value.
It also sold £2.5bn of Italian bonds, following rivals including BNP Paribas, ING and Barclays in selling down sovereign debt in the face of euro zone turmoil.
Its holdings of sovereign debt from Portugal, Italy, Ireland, Greece and Spain was down to £772m at the end of September, from 4bn at the start of the year.
Income in the third quarter slumped 18pc from the previous quarter to £6.4bn, but losses from bad loans dropped by a third to £1.5bn.
The bank followed the likes of Barclays and Morgan Stanley in benefiting from a debt accounting gain, with a £2.4bn gain inflating its reported net profit to £2bn for the quarter.
As part of its restructuring RBS aims to dispose of its insurance arm, possibly via a stock market flotation, in the second half of 2012.