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Rbs Poised To Deliver £1bn Blow To Investors As Stephen Hester Plays Safe

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http://business.timesonline.co.uk/tol/busi...icle6735675.ece

Royal Bank of Scotland is set to disclose worse than expected results on Friday, in a week when Britain’s banks will set the tone for economic confidence for the rest of the year.

RBS is set to disappoint investors with results that could fall short of estimates by at least £1 billion.

It is thought the state-controlled bank will unveil a bleak picture of credit losses and rapidly rising impairments on loans to individuals and businesses. As a result, it may only just break even for the six months to June 30 — a far worse outcome than analysts had foreseen, with Credit Suisse expecting a £1.5 billion pre-tax profit, while Exane BNP Paribas had pencilled in a £3 billion gain.

RBS’s figures may be particularly grim because Stephen Hester, its chief executive, has been ultra-conservative and aggressively written down the value of underperforming loans. But the City is likely to be surprised that the roaring growth RBS is set to report in its global markets business will not be enough to produce a strong profit.

All of the UK’s big banks will announce half-year results next week in what will be one of the most closely watched financial reporting seasons.

Last night it emerged that UK savers suffering from a spate of bank collapses received more than £21 billion in compensation in just six months. The Financial Services Compensation Scheme (FSCS), which hands out up to £50,000 to savers if a financial institution goes under, said in its annual report that the payments came in the wake of the collapse of Lehman Brothers in September, as the global financial crisis started to hit UK savers. It had to compensate a total of 3.5 million bank accounts and the number of inquiries to the FSCS tripled from 73,000 to 234,000.

In the previous seven years, the scheme had paid out just £1 billion.

Five banks were responsible for most of the compensation: Bradford & Bingley, now state-owned after problems with its mortgage book; Heritable Bank; London Scottish Bank; and Iceland’s Kaupthing Singer & Friedlander, and Icesave.

Economic green shoots, though, are what bank investors are looking for now, and they will be keen to see whether banking chief executives are predicting an upturn. At the same time, the Government will be desperate for evidence that the banks are stabilising so it can push forward with its plan to start selling its multi-billion-pound stakes in RBS and Lloyds Banking Group and put in train its plan to privatise Northern Rock.

Santander, the Spanish group, stunned the City this week with a 30 per cent rise in pre-tax profits in Britain, where it owns Abbey, Alliance & Leicester and part of Bradford & Bingley. Analysts do not expect other banks to match Santander’s strong results because its impairments were at about half the industry average.

Lloyds, the UK’s largest retail bank, is set to provide more gory evidence of the fallout from its shotgun takeover of HBOS last year. Bad debts are expected to be about £12 billion, driven by heavy writedowns on the value of HBOS’s property-dominated investments, plus continuing pain from customers defaulting on loans. But due to an accounting treatment of the acquisition, pre-tax profits will come out at about £5 billion in the black.

Disappoint investors??? Don't they mean taxpayers?

At least to accounting rules will come and save Lloyds!!!! I wonder how many business people would love to have the bankers accounting rules working for them.

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RBS’s figures may be particularly grim because Stephen Hester, its chief executive, has been ultra-conservative and aggressively written down the value of underperforming loans. But the City is likely to be surprised that the roaring growth RBS is set to report in its global markets business will not be enough to produce a strong profit.

That's what new chairmen do. Write everything down and paint a bleak picture.

Then when things turn round, profits will be far higher than if he hadn't written down assets and loans.

Everyone then says how smart he is. :)

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