THE global banking industry has been hit with yet another piece of bad news: The Royal Bank of Scotland (RBS) will unveil this week the biggest loss in the history of British banking.
RBS, affected by a multi-billion- pound hit from the global credit crunch, is predicted to reveal a pre-tax loss of at least £1 billion (S$2.7 billion) for the first six months of the year.
Analysts also warn that Britain's second-largest bank could face a loss of as much as £1.7 billion due to strains from the global squeeze on credit.
This revelation came amid warnings by influential economist and New York University academic Nouriel Roubini, who said that the crisis will help kill off hundreds of banks in the United States.
In a report in weekly magazine Barrons, Professor Roubini said the banks have only written down their sub-prime loans so far. Still in front of them are their consumer-credit losses, for which they lack the reserves.
Earlier this year, RBS clinched a record-breaking rights issue totalling £12 billion to shore up its finances after enormous sub-prime-related write-downs and the mammoth takeover of Dutch giant ABN Amro.
Meanwhile, Britain's biggest bank HSBC said yesterday that its net profit dropped 29 per cent during the first half because of ballooning credit write-downs and bad consumer debts.
Europe's biggest bank by stock-market value warned that the outlook remained 'highly challenging' as it reported profit after tax totalling US$7.7 billion (S$10.57 billion) in the six months to June 30, compared with net profit of US$10.9 billion in the same period of last year.
'The first half of 2008 saw the most difficult financial markets for several decades, marked by significant declines in profitability throughout much of our industry, with consequent recapitalisation and restructuring,' HSBC chairman Stephen Green said in comments accompanying the earnings release.
'HSBC was not immune from the turmoil,' he added.
Investors are on edge about the cost of write-downs caused by the US sub-prime crisis and the subsequent tightening of global lending conditions.
Last week, British banks Alliance & Leicester, HBOS and Lloyds TSB said that their interim profits plunged dramatically as they felt the chill from the credit crunch.
