Bank

Royal Bank of Scotland Group PLC (RBS) Friday said it slid to a net loss in the first six months of the year after making hefty write- downs prior to its record-breaking GBP12 billion rights issue in the spring.
The U.K.'s second-largest bank by market capitalization said the net loss was GBP802 million, down from a profit of GBP3.56 billion a year earlier, while revenue, comprising net interest and non-interest income, amounted to GBP13.73 billion, down 7% from GBP14.69 billion a year earlier.
RBS took GBP5.93 billion in write-downs on credit exposure in the first six months, as flagged in April. RBS said markdowns on monoline insurers were higher than previously expected, while markdowns on leveraged finance holdings were lower.
"The results we have published today demonstrate progress in a number of important areas, and it is all the more unsatisfactory, therefore, that they record a loss as a result of our credit market write-downs. We are determined to ensure that the inherent strengths of the group's diverse business model are not obscured in this way again," Chief Executive Fred Goodwin said in a statement.
However, there was relief that things weren't worse than expected. At 0851 GMT, RBS' shares traded up 6 pence or 2.6% at 239 pence, valuing the bank at GBP38.42 billion. On the year, the stock is down 54%, underperforming the 34% decline of the FTSE 350 Banks index.
Bernstein Research said the loss was lower than the market had expected. It noted RBS is threatened by more write-downs and a possible U.K. recession, but, said "the company has taken a conservative stance on write-downs and has the benefit of diversification away from the U.K." Bernstein is keeping RBS at outperform with a 300p price target.
Lehman Brothers noted RBS' leading position as lender to U.K. corporates, " which we believe will be the principal source of increase credit impairment costs for the U.K. banks over the coming credit cycle." Lehman is keeping RBS at underweight.
RBS said the interim dividend will be paid as one share for each 40 shares already held, in line with last year's 10.1 pence.
Including ABN Amro, which RBS bought together with Dutch-Belgian Fortis NV ( 30086.AE) and Spain's Banco Santander S.A. (STD), and assuming it was part of the group all of last year, the proforma net loss was GBP761 million, down from a GBP3.65 billion profit.
RBS is targeting a ratio of equity held against risky assets, or core tier 1 ratio, of over 6% in 2008. The capital increase lifted it to 5.7% at the end of June. RBS is divesting businesses to boost it further and needs about GBP1.5 billion in capital gains to get above 6%.
Friday, Goodwin said the bank is still in talks about selling its insurance operations, but hasn't reached an agreement. He said the worst that could happen would be to destroy value by selling at the wrong price.
U.S. insurer Allstate Corp. (ALL) has reportedly submitted a bid in the second-round, but it is unclear if U.S.-based Travelers Cos. Inc (TRV) has submitted further bids after its initial first-round bid. Germany's Allianz SE ( AZ) said Thursday it had decided against a bid.
Goodwin said that even without completing all planned disposals, the bank will reach its capital targets.
Company Web site: http://www.rbs.com