Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of

RBS takes a £1.5 billion loss due to US sub-prime loans

Posted by markharrison on December 7, 2007

Following the losses I reported from both Bradford & Bingley and Alliance & Leicester last week, the Royal Bank of Scotland (who own Natwest among others) is the latest to report a huge “writeoff” (ie – anticipated loss) as a result of the US sub-prime crisis.

This may seem, at £1.5 billion (of which £950 million was directly related to sub-prime assets), a huge hit, however, things aren’t as bad as they might appear.

Firstly, RBS is plenty big enough – its underlying profitability looks good, and could be as high as £10 billion, so writing off £1.5 billion in one area, while not great, only represents about 15% of the profit.

Secondly, analysts were expecting write-offs to be higher – many predicting as  high as £2 billion earlier in the week, so a £1.5 billion write-off is seen as better than expected. (In a way that sort of reminds me of the famous “Mum, I’ve dropped out of college and am pregnant – not really, I got a B- and wanted you to see it in perspective”-type chain letters.

The only dark cloud is that RBS still has about £5 billion exposure to sub-prime… but even that would still leave them profitable.

Well done to Sir Fred and his team in continuing to be able to make money in a difficult market!


2 Responses to “RBS takes a £1.5 billion loss due to US sub-prime loans”

  1. Elise said

    alas mark, you can now comment away on the scoop gal 🙂
    sorry about prior restrictions…

  2. Elise,

    Thanks for fixing that – now commented over on your site about the “Personal Branding” story.


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