EDINBURGH – Royal Bank of Scotland Group plc (LSE, NYSE: RBS), the parent of Providence-based Citizens Financial Group Inc., today posted a first-quarter loss of 857 million pounds ($1.29 billion), compared with a profit of 245 million pounds in the year-ago period.
In announcing the first-quarter results, RBS CEO Stephen Hester warned that this year and next will be “very tough years for RBS.”
The company, which is 70.3 percent owned by the British government following a bailout last year, noted that revenue jumped 26 percent year over year to 9.7 billion pounds ($14.65 billion), but that improvement was offset by write-offs as a result of the financial crisis.
RBS said impairment losses and credit market write-downs amounted to 4.93 billion ($7.44 billion) for the first quarter.
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In a statement in RBS’ first-quarter update, CEO Stephen Hester was cautious about RBS’ future performance, saying that the recent “buoyancy of financial markets” will continued to be dampened by lower interest rates and the global recession.
“We expect credit conditions to continue to deteriorate over the next few quarters consistent with these trends, and that there will be a slow-down in financial market activity compared with the very buoyant conditions seen in Q1,” Hester said. “Some commentators are beginning to talk about economic recovery; we remain cautious and continue to plan and manage our businesses in the full expectation that both 2009 and 2010 will be very tough years for RBS.”
In response to a reporter’s question during a conference call today, Hester said that Citizens was not for sale. There had been speculation RBS might look to sell its U.S. units as it investigated a restructuring earlier this year.
RBS said its U.S. retail and commercial banking units – which includes Citizens Financial Group – reported a $141 million operating loss in the the first quarter, compared with operating income of $329 million in the same 2008 period.
RBS said the decline was the result of lower interest rates – which narrowed deposit margins – as well as lower investment gains and “subdued activity.” Impairment losses rose to $684 million, compared with $394 million in the first quarter of 2008.
Like most banks, RBS is facing problems with its loan portfolio. The company said non-performing and potential problem loans amounted to 3.50 percent of loans and advances as of March 31, compared with 1.38 percent a year earlier and 2.69 percent three months ago.
“We expect credit impairment losses to continue to reflect very difficult economic conditions seen in the second half of 2008 and the first quarter of 2009, and the resultant increases in non-performing loans across all sectors,” the company said.
Citizens Financial Group Inc. – a division of the Edinburgh-based Royal Bank of Scotland Group plc. (London Stock Exchange: RBS.L; NYSE: RBS) – is a commercial bank holding company founded in Providence in 1828. Additional information about the bank can be found at CitizensBank.com.
