Royal Bank of Scotland (RBS) has posted a pre-tax loss of £691m during the first six months of 2008, the second-biggest loss in UK banking history.
RBS, which owns Natwest bank, said it was hit by £5.9bn of write-downs after the credit crunch cut the value of many of its mortgages and assets.
The bank made a profit of £5bn during the same period last year. Washington diary ...
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RBS boss Fred Goodwin warned that a "deteriorating economic outlook" would compound problems in financial markets.
RBS had been expected to post a much larger loss with some analysts predicting the UK's second-biggest bank could see a loss of between £1.2bn and £1.7bn.
Even so, chief executive Mr Goodwin said the losses had been a "chastening experience", and that reporting a shortfall of £691m was something he and his colleagues "regret very much".
Mr Goodwin warned that difficult conditions in financial markets "look set to be compounded by a deteriorating economic outlook".
Much of RBS's write-down total stems from investments at Dutch bank ABN Amro, bought by RBS and partners last year.
Credit Crunched
RBS, along with a other UK and global banks, has suffered from a drop in the value of risky assets, particularly those linked to US sub-prime mortgages.
Sub-prime borrowers are those with poor or non-existent credit histories, and in recent months the number of defaults has jumped.
As a result, many lenders have had to find ways of boosting their cash reserves, with many deciding to sell shares to existing investors via a right issue.
RBS sold shares worth £12bn in a rights issue that was strongly supported by shareholders, who agreed to buy some 95% of the stock on offer.
The rights issue was the biggest in UK corporate history, and the firm said investors would take up 5.8bn new shares at a value of 200 pence each.
Referring to the current economic difficulties, Mr Goodwin said the bank had "moved decisively" and had drawn heavily on its shareholders for financial support.
"We recognise that we must now deliver a level of performance that meets their expectations for the company and restores value to our shares. We are determined to do so, and this is our focus," said Mr Goodwin.
Other lenders which have also appealed to investors for extra cash including HBOS, and Bradford & Bingley.
RBS shares have more than halved in value over the past year - including a 25% slump since the rights issue was announced in April.
(BBC)
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