Profits could be difficult to achieve for RBS this year.
The Royal Bank of Scotland (RBS) looks set to post its first ever annual loss this year after revealing further write downs. The bank said "severe deterioration" in the financial markets had weakened its balance sheet. It now plans to raise £19.7 billion as part of the government's bailout plan.
Write downs and bad debt charges totalled £206 million, which together with £5.9 billion lost in the first half of the year will have negative impact on 2008 earnings. Operating profit for the first nine months of the year is already eight percent lower than the same period in 2007.
RBS chief executive Stephen Hester told the BBC: "The scale of the market disruption and the economic downturn that is happening as a consequence means that credit losses are rising very sharply. I suspect that people may conclude that profits will be difficult to achieve this year."
RBS will attempt to strengthen its position by selling £5 billion worth of preference shares to the government and a further £15 billion worth of new ordinary shares to existing investors, which will be underwritten by the treasury.
Lloyds TSB and Halifax Bank of Scotland have also unveiled further write downs on assets hit by the credit crunch in the last week. Together the two banks - which are set to merge - plan to raise £13 billion through new share issues and £4 billion from the government.
