Royal Bank of Scotland slid to a pre-tax loss of £678m in the second quarter of 2011 as its loan book deteriorated, driven by losses on Greek government bonds and little sign of improvement in Ireland.
The loss compared with a profit of £1.17 billion a year earlier and came as impairments on bad loans rose to almost £2.3 billion from £2 billion in the first quarter of this year. The bad loans figures was an improvement, however, from the £2.5 billion a year earlier.
RBS made a provision of £733m to cover any losses on its Greek bond portfolio and said the impairment charge at its Ulster Bank operations in Ireland was £1.25 billion, just £49m better than in the first quarter.
Earnings at RBS, 83% owned by the British government after a bail-out during the credit crisis, were also undermined by an £850m provision to cover the costs of compensating customers who were mis-sold payment protection insurance.
RBS recorded a net loss of £1.4 billion for the first half of 2011.
Ulster Bank said that, excluding loan losses, it made a profit of £80m (€91m) in the second quarter. This was down from £104m a year earlier.
The bank said deposits were stable despite tough market conditions, while loans to customers dropped 5% from a year earlier, with the bank blaming subdued demand..
