Royal Bank of Scotland (RBS), which owns Ulster Bank and First Active in Ireland, has reported a smaller-than-expected writedown of £206 million on toxic assets in the third quarter and said this morning a strategic review was under way.
RBS, which is taking £20 billion of emergency capital from the government, said it expected economic slowdown, difficult financial markets and moves to reduce risk on its balance sheet would have an adverse effect on its fourth-quarter and full-year results.
Its operating profit before writedowns in the first nine months of the year was down 8 per cent on the year, reflecting rising bad debts in some of its businesses.
Debt quality deteriorated sharply in the third quarter; in retail and commercial banking, impairments were up 9 per cent in the first nine months of the year, having been down 2 per cent at the half-year stage, the bank said.
RBS wrote down £5.9 billion on structured product assets in the first half, while analysts had forecast it could write off billions more. The bank said accounting changes on how securities are classified had increased operating profit by a net £1.2 billion.
A strategic review is aimed at "achieving appropriate risk-adjusted returns, reduced reliance on wholesale funding and lower exposure to capital intensive businesses," it said.
The Edinburgh-based bank, hit hard by the credit crisis, raised £12 billion from shareholders earlier in the year and could end up about 58 per cent state-owned once the government cash injection is completed.
RBS said it aimed to repurchase £5 billion of preference shares from the government "as soon as it is prudent to do so," which would allow it to restart dividend payments suspended as a condition for taking government cash.