RBS loses half toxic debt 'excess'

RBS has already eaten through nearly half the 60bn pounds 'excess' on toxic debts

Part-nationalised Royal Bank of Scotland has already eaten through nearly half the £60 billion "excess" on toxic debts insured by the taxpayer, it has emerged.

RBS agreed this week to put £282 billion in bad loans into the Asset Protection Scheme (APS), under which it shoulders the first £60 billion in losses on the debts.

But third-quarter results released showed RBS - which will be 84% state-owned under the terms of the APS - used £26.6 billion of the buffer by the end of June.

A further £3.2 billion in loan losses announced for the third quarter - mostly on APS assets - is likely to take RBS's "first loss" close to £30 billion.

The figures came as RBS unveiled a pre-tax loss of £2.1 billion for the July-September period - down from a £1.9 billion profit a year earlier.

The bank has been dragged into the red by continuing credit losses in parts of the business it is winding down or selling, although bad debt charges are stabilising.

The taxpayer is liable for 90% of any hit above the £60 billion under the APS although the recent tentative signs of improvement make losses less likely. RBS is taking a bigger first loss than originally planned under the APS in return for a smaller fee.

Chief executive Stephen Hester, who hopes to return the bank to profit in 2011, said he was "upbeat but realistic" about the tough road ahead for RBS.

The bank said bad debts were "plateauing" but Mr Hester warned: "We owe it to everyone to be realistic and transparent."

He said: "Economic recovery is likely to be slow and the pain of economic adjustment will take years to subside. Our business will reflect these issues."