Royal Bank of Scotland made a £1.4billion loss in the third quarter of 2010, pushing its share price down on 5 November.
Shares in RBS – majority owned by the UK government – were down 3.60 per cent at 14:45 on 5 November, following the publication of the RBS interim management statement showing a loss during the months July to September.
Operating profit was up in its ‘core’ business by 10% from the second quarter, partly due to lower impairments – costs of bad debt – in its retail and commercial business. Group chief executive Stephen Hester insisted the bank continued to ‘make good progress’ in its recovery.
“The Core Bank is becoming stronger. As we focus on serving customers better, profitability is also improving and rebalancing towards a more sustainable mix of business contributions. At the same time, the legacy risks and losses in Non-Core are being worked out effectively and our ambitious restricting efforts continue apace,” he said.
A £825million charge to the government’s asset protection scheme – set-up in 2009 to protect banks from credit losses – was a major cost to the bank which pushed it into a loss. The statement also showed that the bank expects to pay around £250m in 2011 as a result of bank levy tax.
Having closed at 695.10 on 4 November, HSBC shares were trading down 1.64 per cent at 683.70 during the afternoon of 5 November.
The banking group also announced its quarter three results on 5 November, saying that pre-tax profits for the year to date remained well ahead of the 2009 level.
The statement said its personal financial services business was performing ahead of expectations partly due to lower loan impairment charges, while commercial banking was boosted by strong levels of economic activity centred around emerging markets.
Group chief executive Michael Geoghegan said: “The global economy is in better shape than many expected a year ago, and I am pleased to report that HSBC’s performance in October is in line with third quarter trends. But, while the fears of a double-dip in the West may be overplayed, the passage from downturn to upturn is clearly taking longer than previous cycles.”
He said the latest data from emerging markets pointed to a slowdown in the rate of recovery, but the long term fundamentals in developing markets were ‘as compelling as ever’.
Referring to the Independent Banking Commission’s review the banking sector, Geoghegan said policymakers should ‘focus on making banks less systematically damaging should they fail’ rather than simply making them smaller.
He also raised speculation that the bank may consider moving its HQ from London by saying the EU and UK should avoid regulatory changes that create an uneven playing field globally.
“Along with many other international banks, HSBC already complies with the Financial Stability Board’s global principles on remuneration. If the EU takes those principles further and applies additional requirements to European firms operating in emerging markets, it would place those firms at a disadvantage to their regional competitors and to those based in North America,” he added.
© Fair Investment Company Ltd