Royal Bank of Scotland on Thursday reported a loss of 24.1 billion pounds ($34.3 billion) for 2008, the biggest in UK corporate history, and said it planned to place 325 billion pounds of assets in a state insurance scheme.
The bank said the record deficit reflected a 16.2 billion pound write down against acquisitions, including its takeover of parts of Dutch rival ABN Amro in 2007, plus a further 7.9 billion pounds in operating losses.
RBS also announced plans to raise a further 13 billion pounds from the government through the issuance of B shares, and unveiled a cost-cutting programme aimed at reducing expenses by 2.5 billion pounds.
"We have moved purposefully to take major decisions that are necessary to restructure the group," RBS chief executive Stephen Hester said in a statement.
"We are charting a path to standalone strength and with it the goal of justifying the support of the UK government and all our shareholders."
The plan came as Britain launched a scheme that could end up insuring more than 500 billion pounds worth of toxic assets in a bid to get lending in the recession-hit economy.
Under the government-backed insurance scheme designed to support ailing banks, RBS will be responsible for the first 19.5 billion pounds of losses — or 6 percent of the asset value. The government will bear 90 percent of any losses after that, and RBS incurs the remaining 10 percent.
RBS will pay a 6.5 billion pound fee for its asset insurance, equivalent to 2 percent of the assets, funded by the issuance of more "B" shares.
Together these would cover the potential 19.5 billion pound "first loss" on the assets.
Martin Slaney, head of derivatives at GFT, said RBS’s net loss was better than some had feared and that the 2 percent cost of participation in the government’s insurance scheme was also more favourable than expected.
"However there is still a sense with RBS that nationalisation is inevitable. This may stem the decay but the prospect of 100 percent state ownership is still with us," Slaney said. "The 2.5 billion pound cost-base cuts will translate into ten of thousands of job cuts."
RBS also unveiled a restructuring that will put non-core assets into a separate unit for sale or run down over the next three to five years.
The unit will include about 20 percent of the bank’s assets, or 240 billion pounds. It is also radically restructuring its investment banking arm, taking out 45 percent of the capital employed there.
RBS shares were up 24 percent at 27.7 pence at 0815 GMT, after rising 30 pct in early trading.