(27 February 2009 – UK) The Royal Bank of Scotland (RBS) has announced the biggest annual loss in UK corporate history, at £24.1 billion (A$53.4 billion).The record loss by RBS beats out the next biggest loss by a UK bank by a considerable margin; HBOS’s (as part of Lloyds) most recent result, a loss of £10.8 billion (A$23.8 billion).
The £24.1 billion (A$53.4 billion) loss by RBS was primary caused by £16.2 billion in write-downs of goodwill and other intangible assets. This was mainly linked to its purchase of ABN Amro.
Specifically, of the total goodwill reduction, £7.7 billion relates to goodwill in respect of the acquisition of ABN AMRO, while other significant impairments have been recorded; a reduction in Citizens/Charter One goodwill of £4.4 billion and NatWest goodwill of £2.7 billion.
A massive reduction in income of more than £6.6 billion compared with the prior year and a tripling of impairments to £6.96 billion led to an underlying profit of just £80 million which compares to £10.3 billion in 2007.
RBS said that the income reduction was primarily a result of a substantial decline in non-interest income, a number of specific losses such as counterparty failures, and a marked increase in the credit impairment charge.
The bank also said that while income increased in 2008 in Global Transaction Services, and held steady in Regional Markets and Insurance, a significant reduction occurred in Global Banking & Markets, where a strong performance in rates, currencies and commodities was offset by marked deterioration in credit markets and equities.