ROYAL Bank of Scotland delivered a big blow to the banking sector by announcing losses of £857m for the first three months of 2009.
It also warned that losses this year could soar to £12bn.
RBS said a buoyant three months for its investment banking division had been offset by the impact of record low interest rates on margins and steadily rising bad debts due to the recession.
Pre-tax losses were £44m, but the £857m reverse came after tax, dividend pay-outs on Government preference shares and money due to partners on the sale of its Bank of China stake.
The £2.9bn in bad debt charges compared with just £656m a year earlier in the tougher economic climate for both businesses and consumers.
Impairment charges as a percentage of its loans rose to 1.33% in the first quarter – while RBS also booked a further £2.1bn hit on credit market exposures.
The bank is insuring more than £300bn of toxic debts in a taxpayer-backed insurance scheme, but is liable for the first £19.5bn of any loss.
RBS said it expected up to 85% of the impairments and credit market losses announced yesterday to count towards its first loss – meaning the bank will already have burnt through about £4bn of its buffer.
Chief executive Stephen Hester warned against hopes of a speedy recovery for the business, which is more than 70% owned by the taxpayer, saying that this year and next would be “very tough”.
“No-one should be in any doubt that this is a process that will take years not months,” he said.
The uncertainty of last year’s banking crisis had given way to a “severe but recognisable” recession.
