Some thoughts on today’s news

This morning I was listening to 5Live, and Robert Peston came onto to discuss the latest figures from Royal Bank of Scotland. RBS was writing down up to £8bn for 2008. Peston also said that this meant that RBS had written off about £47bn in total. He said the same thing on the Today programme.

Forty seven billion pounds is a staggering amount of money. It is about $70 bn. It is about 2.5% of the whole of the UK GDP in 2007 (about $2,770 bn).

Here are the annual profit figures for RBS:

£m Profit before tax Tax Profit
after tax
1994 532 146 386
1995 602 202 400
1996 695 191 504
1997 760 219 541
1998 1,001 286 715
1999 1,211 361 850
2000 3,332 1,171 2,161
2001 4,275 1,537 2,738
2002 4,763 1,556 3,207
2003 6,159 1,910 4,249
2004 6,917 2,155 4,762
2005 7,936 2,378 5,558
2006 9,186 2,689 6,497
2007 9,900 2,052 7,848
Total 55,440 16,314 39,126

Source: Annual reports from RBS

So RBS has effectively written off more than all the profit after tax since 1994: it hasn’t made any money for fourteen years.

True it isn’t “real” money – these are accounting adjustments: but profits aren’t necessarily real either. Different years may not be completely comparable – RBS made a lot of acquisitions in Europe and America, most notable NatWest in 2000 and – an acquisition too far – ABN Amro in 2007.

In that time, of course, RBS has paid a lot of money in tax. As any profitable enterprise should.

There are a couple of reasons I chose 1994 as the year to go back to in the accounts. It was one of the first I could get hold of (in the five year summary from the 1997 accounts – I could have gone back to 1992, but it wouldn’t have made a great deal of difference). But perhaps more importantly for me, 1994 was when I became an employee of RBS. (I left three years ago, I’m pleased to say.)

Back in 2001, after the acquisition of NatWest, the department I worked in held a big meeting as part of its process to integrate staff from RBS and NatWest. In the evening, there was a party: the theme of the party was a casino. Everyone was given a handful of chips with a notional “value” to play on a variety of tables – roulette, black jack, that kind of thing.

It now seems rather ironic.


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