RBS expects tough Q4, cuts euro zone exposure

Royal Bank of Scotland expects difficult market conditions in the fourth quarter, with banks around the world hit by Europe's debt crisis, and the part-nationalised lender added it had taken more writedowns on its Greek exposure.
RBS, which is 83% owned by the British government following a state bailout during the 2008 credit crisis, said on Friday that it had made a third-quarter net profit of around 1.2 bln pounds ($1.9 bln).
RBS followed the likes of Barclays and Morgan Stanley in benefiting from a debt accounting gain, which boosted its earnings by 2.36 bln pounds and helped offset lower profits at its GBM investment banking division.
RBS added, however, that it had taken a further impairment loss of 142 mln pounds on its exposure to Greece during the third quarter.
"RBS's third-quarter results show the improved strength and resilience we have built up since 2008," Chief Executive Stephen Hester said in a statement.
"They also highlight the external pressures facing banks, and economies more broadly, which are making the road to recovery longer and bumpier than hoped for," he added.
RBS added it sold 2.5 bln pounds of Italian bonds in the third quarter, leaving it with just 294 mln pounds worth, following rivals including BNP Paribas, ING and Barclays in selling down sovereign debt in the face of euro zone turmoil.
RBS had cut its holdings of sovereign debt from Portugal, Italy, Ireland, Greece and Spain to 772 mln pounds at the end of September, from 4 bln at the start of the year, with most sales in the third quarter.
RBS shares closed down 1.4% at 22.80 pence on Thursday — still well below the average 49.9 pence price at which the British taxpayer acquired its stake in the bank.
RBS shares have fallen by nearly 50% over the last year.