It was only around a year ago, that the mighty Royal Bank of Scotland made global banking history by acquiring ABN Amro. It wasn't the first time that the bank had gone down in history as the acquisition of the National Westminster bank in 2000 was the largest acquisition in UK banking history. A year ago it seemed like the bank was an unstoppable force as it powered its way from a UK centric bank to the global arena. Sir Fred Goodwin, the man at the helm of the ship, proudly grew the franchise to an operating profit of around £10 billion in 2007. And although the market conditions were deteriorating as they moved into 2008 the bank stood as the 13th largest financial institution in the world according to Forbes.
 
RBS may well have been able to continue its rapid growth, if it weren’t for the US sub prime crisis. This was the first major hurdle to hit RBS as it began to right down billions of pounds due to its exposure to this market. It came as a huge blow to the company’s balance sheet as they had just sealed the ABN acquisition for 72 billion Euros. The ship was entering troubled waters. So much so that earlier this year RBS had to call for a Rights Issue to shore up their balance sheet to the tune of £12 billion.

 
The full extent of the damage started to reveal itself in their 2008 half year report as they took a £691 million loss. When compared to around a £5 billion half year profit in 2007, it was clear to see where the ship was headed. The share price continued to dwindle and fell 25% in August as the financial crisis grew. With a number of financial institutions going under, borrowing began to become more expensive for banks which hit RBS hard.

 

To the relief of the bank, the government has agreed a bail out in the form of a capital injection in exchange for shares and the government will be the largest share holder - in essence the bank has been nationalised. From £10bn profits to a nationalised industry - RBS is back in the history books again.