State-controlled Royal Bank of Scotland posted on Friday a net loss of 1.04 billion pounds ($1.7 billion) in the first half, up from a loss of 827 million pounds in the previous year.

Bank's bad debts, which soared to 7.5 billion pounds and slothful retail plus corporate businesses, played a vital role in dragging the bank into losses.

RBS shares plunged about 13.7% after CEO Stephen Hester's warning that the results would be poor over the next two years and recovery would take a long time.

However, bank's statutory pre-tax profit stood at £15 million, while revenue soared 58% to settle at 21.84 billion pounds as compared with 13.84 billion pounds last year.

The core businesses that RBS wants to keep, recorded an operating profit of 6.3 billion pounds during the first half of 2009, while non-core businesses it wants to get rid of reported an operating loss of 9.6 billion pounds.

It may be noted here that RBS has named Bruce Van Saun, a U. S. banker as its new finance director in an attempt to overhaul its management.