State-rescued Royal Bank of Scotland reported a five-fold jump in write-offs linked to the credit crunch, to £7.5 billion, and warned yesterday that bad debts would remain "high for a while".
The surge in first-half impairment charges led RBS to report a 26 per cent jump in net losses during the six months to June 30 compared with the figure for the same period last year.
"Our first half results, as we had clearly warned, are poor with a net attributable loss of £1 billion," RBS chief executive officer Stephen Hester said in a bleak results statement from the government-controlled bank.
"Impairments rose 409 per cent to £7.5 billion (€8.8 billion) and are set to stay high for a while," Mr Hester warned of the bank's credit-crunch related bad debts.
"There will be no miracle cures. Our task is no less than one of the largest bank restructurings ever done, in the face of strong economic headwinds.
"Overall results may not substantially improve until 2011 and full recovery will take time," he added.
In early morning trading, the share price of RBS slumped almost 14 per cent to 46 pence on London's benchmark FTSE 100 index, which was down 0.55 per cent.
RBS managed a pre-tax profit of £15 million in the six months to June 30 after a loss of £726 million in the first half of last year. Some analysts had expected profit before tax totalling £1.5 billion.
RBS, ravaged by the credit crunch and the 2007 takeover of Dutch group ABN Amro at the top of the market, is 70 per cent owned by the British government, which has pumped billions of pounds into the ailing bank since last year.
The troubles at RBS have meanwhile led to a boardroom shake-up with Mr Hester replacing disgraced former chief executive officer Fred Goodwin, who led the bank to Britain's biggest annual corporate loss of more than £24 billion last year. Yesterday, RBS announced the appointment of Bruce Van Saun, a former Bank of New York Mellon chief financial officer, as its new finance director, completing an overhaul of the British bank's top executive team.
In a bid to cut costs, RBS announced on Tuesday that it was selling part of its Asian operations to Australia and New Zealand Banking Group for 418 million dollars.
It is also slashing up to 9,000 jobs by 2011, half of them in Britain, to save £2.5 billion.
RBS is the last of Britain's main banks to have posted their half-year results. Another state-controlled lender, Lloyds Banking Group, on Wednesday reported a first-half net loss of £3.12 billion, which compared with net profit of £1.95 billion a year earlier.
LBG added that its impairment levels had probably peaked amid a deep recession in Britain.
Also this week, emerging markets bank Standard Chartered posted record interim profits, while Barclays and HSBC posted combined first-half net profits of $6.55 billion despite massive bad debts.