THE Royal Bank of Scotland, two days after completing Europe's biggest rights offering, faces "more bad news than good news" for as long as 15 months, Chief Executive Officer Fred Goodwin said yesterday.
RBS fell as much as 3.4 percent in London trading after the Edinburgh-based bank said it was enduring a slump in UK housing and declines in securities revenue. While RBS is sticking with its April estimate that this year's credit-related writedowns will be 5.9 billion pounds (US$11.6 billion), Goodwin declined to say whether the bank will meet analysts' 2008 profit estimates, Bloomberg News said.
RBS, Britain's second-biggest bank, said earnings will be "satisfactory" as it increases loan rates and credit requirements in the UK and wrings costs out of ABN Amro Holding faster than it forecast. The bank raised 12.3 billion pounds in a rights offering after writedowns and its acquisition of ABN Amro's investment banking and Asian units depleted capital.
RBS fell as much as 8 pence and traded down 2.7 percent to 227 pence at 10:11am in London, valuing the bank at 36.6 billion pounds. RBS's stock is down 41 percent this year, compared with the 23-percent decline for eight-member FTSE 350 Banks Index.
UK banks are scaling back growth amid rising defaults as the housing market heads for its biggest slump since the early 1990s. Banks and securities firms worldwide have sought almost US$289 billion from outside investors as asset writedowns and investment losses caused by the collapse of the subprime mortgage market stand at US$392 billion, according to data compiled by Bloomberg News.
"There is clearly more bad news than good news," Goodwin told reporters. "It is almost exclusively bad news. The risk environment is changing. There is going to be a correction."