RBS Expects full-year loss up to 28 billion pounds

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LONDON – Crisis-stricken Royal Bank of Scotland took fresh help from the government on Monday and announced that its losses for last year could reach 28 billion pounds ($41.3 billion) — the biggest ever for a British corporation.

The government raised its stake in RBS from 58 percent to 70 percent in a deal which will save the company 600 million pounds a year in interest charges, but the agreement ignited fears in the market that the bank could soon be fully nationalized. RBS battered shares lost two-thirds of their value in Monday's trading.

"Isn't this nationalization in all but name?" said Vincent Cable, a senior lawmaker from the Liberal Democrat party.

Prime Minister Gordon Brown, who separately announced a new round of bailouts for Britain's troubled banks, scolded RBS for what he called irresponsible risk-taking on mortgage-related securities in the United States and the expensive takeover of Dutch bank ABN Amro.

The bank said it expected to mark down the value of past acquisitions including the ABN Amro deal by 15 billion to 20 billion pounds, plus posting other losses up to 8 billion pounds after a dismal fourth quarter.

The largest full-year loss previously reported by a British corporation was 15 billion pounds, by Vodafone in 2006.

Royal Bank of Scotland shares, which traded at around 300 pence a year ago, finished the day down 67 percent at 11.6 pence.

The bank said profits in retail and commercial business in Britain had been wiped out by losses in its global banking and markets division.

The bank said it had reached an agreement with the government, which took a 58 percent stake in the first round of bank bailouts, to convert 5 billion pounds in preference shares held by the government to ordinary shares, saving RBS having to pay some 600 million pounds a year in dividends.

"Yes, I am angry at the Royal Bank of Scotland and what happened," Brown said at a news conference where he announced a new insurance program to cushion British banks' exposure to bad assets.

"Almost all their losses are in the subprime markets in America and related to the acquisition of the bank ABN Amro. And these are irresponsible risks which were taken by a bank with people's money in the United Kingdom," Brown said.

In 2007 RBS led a consortium including Belgian-Dutch group Fortis and Spain's Banco Santander in a takeover of ABN Amro at a cost of euro70.5 billion.

In April, RBS launched a 12 billion pound rights issue to raise more capital from investors, the largest in British corporate history. Fred Goodwin, who directed the bank's aggressive expansion, resigned in November when the government took a 58 percent stake in RBS in a first round of bailouts.

"The dislocation of credit markets and the global economic downturn continue to hit RBS hard, as with many other banks," said RBS Chief Executive Stephen Hester.

"Significant uncertainties and risks inevitably remain. In this context, the support we are receiving from government benefits all our stakeholders and enables us to provide more customer support in return," he added.

ABN Amro Holding NV announced Monday that it expects to report a full-year profit of euro3.5 billion, thanks to a one-time gain of euro16.5 billion from the sale of operations including Banco Real, Banca Antonveneta and its asset management business. Continuing operations lost about euro13 billion, the company said.