Royal Bank of Scotland Posts Largest Annual Corporate Loss in British History
Friday, February 27, 2009
LONDON, Feb. 26 -- The Royal Bank of Scotland, a global giant whose spectacular crash has become a symbol of banking excesses of the past decade, reported the largest annual corporate loss in the history of the United Kingdom on Thursday.
The bank, which is now 70 percent owned by British taxpayers following an unprecedented government bailout, reported that its 2008 losses were 24.1 billion pounds, or about $34.5 billion at current exchange rates.
The RBS losses are the latest in a string of increasingly grim financial results in Britain, where -- as in the United States -- the global financial crisis has caused thousands of job losses and business closings and record numbers of home repossessions.
Prime Minister Gordon Brown will discuss the global response to the financial crisis next week when he meets with President Obama at the White House and addresses a joint session of the U.S. Congress.
The bank, in a statement, said it would seek government insurance for $465 billion in toxic assets through a new program designed to shore up teetering banks.
Under that scheme, which is similar to a "bad bank" scenario in which financial institutions are able to separate performing assets from nonperforming ones, the bank would be responsible for the first $27.9 billion in losses on those assets. After that, taxpayers would be responsible for 90 percent of any new losses, the bank said.
Lloyds Banking Group, which includes the merged Lloyds TSB and HBOS, is also widely reported to be planning to sign up for the scheme Friday, when it will report 2008 results that are also expected to show remarkable losses.
"We owe our continued independence to the U.K. government and taxpayers and are very thankful for their support," said RBS Chairman Philip Hampton, whose bank has been partly nationalized with an injection of $28.6 billion in government funds.
The bank said Thursday that the government would inject an additional $18.6 billion in capital. The bank also has an option to seek $8.5 billion more.
While the fall of RBS is a complex story combining both corporate hubris and the stunning misjudgments of the subprime mortgage crisis, former chief executive Fred Goodwin has emerged as the prime symbol of the bank's failures.
Goodwin's hard-charging expansion of what began as a modest Scottish bank -- particularly the disastrous 2007 takeover of Dutch bank ABN Amro -- is widely seen in Britain as a key reason RBS collapsed under the weight of massive bad debt.
So anger, both among the public and in the halls of Parliament, grew Thursday when it was disclosed that Goodwin, 50, was awarded a lifetime annual pension of $931,000.