RBS in £1.25bn credit crunch hit by Finance News Bulletin

Published: 01/01/08

Royal store of Scotland (RBS) has warned it expects to mark off about £125bn because of its exposure to bad debts in the US sub-prime loans marketAbout £300m of the defeat relates to the exposure to the US of Dutch store ABN Amro, which it bought in OctoberBut the hit is less than many had expected and RBS said its 2007 proceeds would beat analysts' forecasts

Rising mortgage defaults and falling US home prices have meant loans bought by banks are value less than thoughtLet's not get carried away here RBS has been bashed by the debacle in structured finance and in the US sub-prime marketThe bank's chief decision-making Fred Goodwin said that the write-downs were based on what RBS consideration its total wounded would beThere would only be further wounded if the situation "got significantly worse from where it is now", he added

In a trading update, the UK's next largest bank, said that it faced a £250m impairment accuse on loans made to private-equity buyoutsBut RBS said it had been able to offset this by drawing on money reserves rather than being forced to have a loan of from the more expensive wholesale credit marketBBC commerce editor Robert Peston said the bank's losses were "not nice, but a extended way from lethal""Only a few years ago - before a takeover spree - injure on that scale would have killed RBS," he supposed

"Today it means that RBS's pre-tax proceeds for 2007 will be a fraction under £105bn, a new evidence"RBS also revealed that deposits had full-grown rapidly in the second half of the year as savers deserted the stricken bank Northern Rock and looked to put their money elsewhereThe BBC's Mr Peston supposed that about £800m of additional cash had been put into RBS accounts in new months

"At a time when the rates charged by banks for lending to each other is hitting evidence levels, this inflow of deposits represents contemptible money," he saidRBS added that its integration with ABN since its 71bn-euro ($985bn; £49bn) takeover was "moving ahead well" and that the benefits were set to be "somewhat greater than anticipated"The contract, completed in October after a request war with Barclays, was Europe's biggest banking takeover to date

And it said that while enlargement at its investment bank arm had slowed, it was put to report good income growth for 2007Analyst Keith Bowman of Hargreaves Lansdown Stockbrokers supposed that RBS had answered concerns about its place "with some style""Whilst some lingering concerns will remain, with the full crash of the current credit crunch still yet fully quantified, the statement should greatly reinstate investor confidence," he

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