ROYAL BANK OF SCOTLAND will this week own up to a loss of about £1.5 billion from the credit crisis which has hit the world’s banks in the past three months.

However, RBS, Britain’s second-biggest bank, will mount a robust defence, arguing that its diverse operations will allow it to weather the financial storm.

The losses, which will be unveiled in a trading statement on Thursday, come after RBS’s shares have been hit hard this year, losing about a third of their value, or close to £19 billion.

Investors have been unnerved by the threat of huge write-downs by western banks totalling $50 billion (£24 billion) in recent months. RBS has a strong position in structured finance and debt products including collateralised debt obligations, parcels of debt that are sold on to investors.

This has prompted fears that RBS could be hit by billions of pounds of losses, with one wild rumour last week suggesting a £12 billion write-down.

Analysts at Sanford Bernstein forecast that the losses would be £1.9 billion – higher than the £1.3 billion sub-prime mortgag-es-related charge announced by Barclays last week.

RBS’s chief executive Sir Fred Goodwin is also expected to reassure the market about its capital position.

The bank’s crucial core tier one ratio – a measure of financial strength – is expected to drop from 4.7% to 4.25% by the end of the year following its takeover of parts of Dutch bank ABN Amro in a €71 billion (£50.5 billion) consortium deal.

However, Goodwin is likely to stress that RBS generates a lot of cash and can rebuild its ratios rapidly. The bank will also make a strong defence of its business model, which spans retail banking, capital markets and operations in America and Europe.

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