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RBS has £691m loss in first half | RBS has £691m loss in first half |
(10 minutes later) | |
Royal Bank of Scotland (RBS) has posted a pre-tax loss of £691m during the first six months of 2008, the second-biggest loss in UK banking history. | |
RBS, which owns Natwest bank, said it was hit by £5.9bn of write-downs after the credit crunch cut the value of many of its mortgages and assets. | |
The bank made a profit of £5bn during the same period last year. | The bank made a profit of £5bn during the same period last year. |
Much of the write-down total stems from investments at Dutch bank ABN Amro, bought by RBS and partners last year. | Much of the write-down total stems from investments at Dutch bank ABN Amro, bought by RBS and partners last year. |
Credit Crunched | |
RBS, along with a other UK and global banks, has suffered from a drop in the value of risky assets, particularly those linked to US sub-prime mortgages. | |
Sub-prime borrowers are those with poor or non-existent credit histories, and in recent months the number of defaults has jumped. | |
As a result, many lenders have had to find ways of boosting their cash reserves, with many deciding to sell shares to existing investors via a right issue. | |
RBS sold shares worth £12bn in a rights issue that was strongly supported by shareholders, who agreed to buy some 95% of the stock on offer. | |
The rights issue was the biggest in UK corporate history, and the firm said investors would take up 5.8bn new shares at a value of 200 pence each. | |
Other lenders which have also appealed to investors for extra cash including HBOS, and Bradford & Bingley. | |
RBS shares have more than halved in value over the past year - including a 25% slump since the rights issue was announced in April. |