RBS Books Greek, Portugal Debt Loss Amid Portfolio ‘De-Risking’
August 06, 2010, 5:58 AM EDT
By Paul Dobson
Aug. 6 (Bloomberg) -- Royal Bank of Scotland Group Plc said it sold bonds from nations such as Portugal and Greece at a loss of 105 million pounds ($167 million), “de-risking” its portfolio in the wake of the sovereign-debt crisis.
“Losses were realized during the first half of the year on disposal of a portfolio of lower-rated sovereign debt securities, including Greece and Portugal,” the Edinburgh-based bank said today as it reported earnings. “The group continued to reduce exposures to countries with credit ratings of A+ or below during the second quarter.”
Bonds from nations on Europe’s periphery slumped in the first half, with the Greek 10-year yield surging to a record of more than 12 percent, on speculation the countries would struggle to finance their debt. The losses forced a European Union and International Monetary Fund bailout, including the purchase of securities by the European Central Bank. RBS has been Britain’s biggest government-owned lender since 2008, when it was rescued in the wake of the credit crunch.
The bank, which reported its first profit today since 2007, said it disposed of 300 million pounds of Greek bonds in the second quarter. A table of available-for-sale debt securities in the statement shows holdings of Spanish, Irish and Portuguese government securities were also reduced.
The company reinvested the proceeds from maturing U.K. securities in debt from other nations among the so-called Group of 10, primarily in U.S. government securities, it said.
‘Vulnerable States’
“Euro zone country exposures were and continue to be tightly managed given the pressures on vulnerable member states,” the bank said. “Overall reductions, in-depth reviews and de-risking of portfolios were applied to Greece, Spain, Portugal, Italy and Ireland.”
Greece was cut four steps to non-investment grade, or junk, by Moody’s Investors Service on June 14, two months after Standard & Poor’s lowered its credit rating to sub-investment level. Portugal had its credit rating cut two levels to A1 by Moody’s on July 13. S&P rates Portugal A- since a downgrade on April 27, while Fitch Ratings gives the nation an AA- grade.