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| RBS shares plunge on record loss | RBS shares plunge on record loss |
| (30 minutes later) | |
| Royal Bank of Scotland shares have plunged 63% after the bank said it was heading for a record loss. | Royal Bank of Scotland shares have plunged 63% after the bank said it was heading for a record loss. |
| The bank said it expects to report a deficit before write-downs of between £7bn and £8bn for 2008. | The bank said it expects to report a deficit before write-downs of between £7bn and £8bn for 2008. |
| It will also write down assets, largely related to its takeover of ABN Amro in 2007, of up to £20bn in 2007. | It will also write down assets, largely related to its takeover of ABN Amro in 2007, of up to £20bn in 2007. |
| RBS's final deficit is set to beat Vodafone's 2006 loss of £15bn, the current UK record. The bank also said jobs would go because of the downturn. | RBS's final deficit is set to beat Vodafone's 2006 loss of £15bn, the current UK record. The bank also said jobs would go because of the downturn. |
| The firm's shares were down 22 pence or 63% to 13p in afternoon trading in London. | The firm's shares were down 22 pence or 63% to 13p in afternoon trading in London. |
| As part of the government's package to rescue British banks announced on Monday, the Treasury said it would swap £5bn of preference shares for ordinary shares in the bank, taking its stake in RBS to nearly 70%. | As part of the government's package to rescue British banks announced on Monday, the Treasury said it would swap £5bn of preference shares for ordinary shares in the bank, taking its stake in RBS to nearly 70%. |
| 'Ill-timed' takeover | 'Ill-timed' takeover |
| RECENT FINANCIAL RESULTS Fourth-quarter 2008 results Citigroup: $8.3bn (£5.7bn) lossBank of America: $1.7bn lossDeutsche Bank: Estimated $6.4bn loss (4.8bn euros; £4.4bn)JP Morgan Chase: $702m profit Source: Company statements | RECENT FINANCIAL RESULTS Fourth-quarter 2008 results Citigroup: $8.3bn (£5.7bn) lossBank of America: $1.7bn lossDeutsche Bank: Estimated $6.4bn loss (4.8bn euros; £4.4bn)JP Morgan Chase: $702m profit Source: Company statements |
| "Credit and market conditions in the fourth quarter of 2008 were particularly challenging," RBS said in a trading update. | "Credit and market conditions in the fourth quarter of 2008 were particularly challenging," RBS said in a trading update. |
| RBS led a consortium, which also included Dutch bank Fortis and Spain's Santander, that bought ABN Amro in 2007. | RBS led a consortium, which also included Dutch bank Fortis and Spain's Santander, that bought ABN Amro in 2007. |
| BBC business editor Robert Peston said that the acquisition "must now rank as one of the worst and most ill-timed takeovers in history". | BBC business editor Robert Peston said that the acquisition "must now rank as one of the worst and most ill-timed takeovers in history". |
| But he also added: "No one should fear, however, that this is a bust bank." | But he also added: "No one should fear, however, that this is a bust bank." |
| Shares swap | Shares swap |
| The agreement to swap preference shares for new ordinary shares will stop RBS having to pay the 12% fixed dividend that preference shares attract - worth £600m per year - and could allow it to increase lending. | The agreement to swap preference shares for new ordinary shares will stop RBS having to pay the 12% fixed dividend that preference shares attract - worth £600m per year - and could allow it to increase lending. |
| SHARE DIFFERENCES Ordinary shares: Give you voting rights at general meetings, and pay a variable dividend depending on profitsPreference shares: Give you no voting rights, but pay a fixed dividend irrespective of profits Financial jargon explained | SHARE DIFFERENCES Ordinary shares: Give you voting rights at general meetings, and pay a variable dividend depending on profitsPreference shares: Give you no voting rights, but pay a fixed dividend irrespective of profits Financial jargon explained |
| The government invested in both types of shares in RBS, Lloyds TSB and HBOS as part of its £37bn bail-out last October, bringing its stake in RBS to 58%. | The government invested in both types of shares in RBS, Lloyds TSB and HBOS as part of its £37bn bail-out last October, bringing its stake in RBS to 58%. |
| But the banks have complained that the commitment to pay such a large dividend, regardless of their profit levels, is prohibitive. | But the banks have complained that the commitment to pay such a large dividend, regardless of their profit levels, is prohibitive. |
| Chancellor Alistair Darling said banks would not be legally obliged to lend to companies and individuals as part of a new multi-billion package to restore confidence in the British banking industry. | Chancellor Alistair Darling said banks would not be legally obliged to lend to companies and individuals as part of a new multi-billion package to restore confidence in the British banking industry. |
| "We have taken a greater shareholding in that bank [RBS] but what we said in return is you've got to lend about £6bn more to businesses, to people and the RBS group have agreed to that," he said. | "We have taken a greater shareholding in that bank [RBS] but what we said in return is you've got to lend about £6bn more to businesses, to people and the RBS group have agreed to that," he said. |
| The bank's chief executive, Stephen Hester said his mission was "to get a grip on the past and fix it". | |
| "We now need to get our own house in order, and we are working purposefully to that end." | "We now need to get our own house in order, and we are working purposefully to that end." |
| "It is our job to clean this up and make RBS strong again," he said. | "It is our job to clean this up and make RBS strong again," he said. |
| Overseas cutbacks | Overseas cutbacks |
| Mr Hester warned that with economies around the world slowing, there was less demand for lending from potential customers, and that would inevitably have an impact on the banking sector. | Mr Hester warned that with economies around the world slowing, there was less demand for lending from potential customers, and that would inevitably have an impact on the banking sector. |
| "We, and all other banks, have to cut our costs, and of course that does involve jobs." | |
| "We do know for certain there will be more credit losses ahead of us as the recession works its way through the world's major economies." | "We do know for certain there will be more credit losses ahead of us as the recession works its way through the world's major economies." |
| He also said that the bank's main retrenchment, would be in its overseas businesses, allowing it to concentrate on its core UK operations. | He also said that the bank's main retrenchment, would be in its overseas businesses, allowing it to concentrate on its core UK operations. |
| "We did expand too much outside the UK, and we need to shrink that back. Our strongest businesses are in fact, in the UK." | "We did expand too much outside the UK, and we need to shrink that back. Our strongest businesses are in fact, in the UK." |