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Royal Bank of Scotland reports £2bn loss RBS shares slide as losses continue
(about 2 hours later)
Royal Bank of Scotland has reported a loss of £1.98bn for 2015, its eighth year of annual losses. Royal Bank of Scotland (RBS) has reported a loss of £1.98bn for 2015, its eighth year of annual losses.
The deficit is partly due to £3.6bn for litigation costs, including £600m to cover claims over the mis-selling of payment protection insurance. RBS shares fell 7% on the news and remain well below the price the government paid for an 84% stake to save the bank in 2008.
The bank, which is still 73% government owned, set aside £2.9bn for restructuring. The bank, which came close to collapse at the height of the financial crisis is still setting aside billions to cover past mistakes and fines.
Once these costs are stripped out, RBS recorded a £4.4bn underlying profit, down from £6bn a year earlier. Even after all these costs are stripped out, profits are still falling.
The annual loss is partly due to a £3.6bn charge to cover conduct and litigation costs, many of them in the US.
RBS also set aside another £2.9bn for restructuring, as it withdraws from 25 of the 38 countries it still operates in.
'Work to do''Work to do'
RBS said the fall in underlying profits was due to lower income from interest payments, Underlying profits at RBS, which is still 73% government-owned, dropped to £4.4bn, from £6bn a year earlier.
RBS said the fall in these profits was largely due to lower income from interest payments.
Chief executive Ross McEwan told the BBC's Today programme: "Low interest rates do hurt banks and its very clear interest rates will stay lower for much longer now.Chief executive Ross McEwan told the BBC's Today programme: "Low interest rates do hurt banks and its very clear interest rates will stay lower for much longer now.
"The UK and Republic of Ireland have quite strong economies... but you are seeing a slowing down in a number of economies around the world and low interest rates do hurt banks.""The UK and Republic of Ireland have quite strong economies... but you are seeing a slowing down in a number of economies around the world and low interest rates do hurt banks."
Mr McEwan added: "We still have a lot of work to do in the cost base of the business" "We have still got a number of conduct and litigation issues - the largest of those is in the US - which we have to settle. Unfortunately that is not in our gift time-wise.
Last year RBS reported a loss of £3.5bn. "We need to sell off Williams and Glynn which is the branch network we are committed to selling off by 2017, and we need to show a track record that we have got a very good bank underneath all these headline noises."
Bonuses 'Disappointed'
The money RBS pays out in bonuses to staff was reduced by 11% to £373m for 2015, and Mr McEwan said he would not take a £1m "role-based" incentive, which is paid on top of salaries by some banks. Among the conduct and litigation issues RBS has put aside £600m to pay claims for the mis-selling of payment protection insurance in the UK.
Mr McEwan also said that in 2016 he would give half of his role-based pay to charity. RBS also said it had cut costs by £983m last year, and boosted net mortgage lending by 10% on a year ago to £9.3bn.
In August, the government sold a 5.4% stake in RBS at 330p a share, raising £2.1bn. Michael Hewson, Chief Market Analyst at CMC Markets, UK said: "Every year we hope that the time has come for the bank to turn a corner and every year we return disappointed.
"CEO Ross McEwan must be wishing he had never taken on the task of turning the bank around when he took over the reins in August 2013."
Pay package
The money RBS pays out in bonuses to staff was reduced by 11% to £373m for 2015.
Mr McEwan's salary and incentive pay has increased from 2014, when he received £1.8m.
In 2015, on top of Mr McEwan's £1m salary he was awarded a £1m "role-based" incentive, but has personally donated the sum to charity.
Mr McEwan also said that in 2016 he would give half of this role-based pay to charity.
However, he has also been given £1.347m as part of a three-year performance related award, and £350,000 in pension allowances.
Share sale
Turmoil on the stock markets has meant that the government's plans to sell off more of its stake in RBS are likely to be delayed.
In January this year, it suspended the sale of its final stake in Lloyds Banking Group. Taxpayers own just under 10% of Lloyds.
In August, the government managed to sell a 5.4% stake in RBS at 330p a share, raising £2.1bn.
The price was third below the 500p a share paid by the government when it took its stake in the bank during the financial crisis, and represented a loss of about £1.07bn.The price was third below the 500p a share paid by the government when it took its stake in the bank during the financial crisis, and represented a loss of about £1.07bn.
The price at close of trade on Thursday was 244p. Mr Hewson said: "It turns out the decision by the UK government to pare down .... its stake in the bank in the middle of last year doesn't look such a bad decision after all, amidst a chorus of criticism that it was sold off too cheaply. That 330p price seems a long way away now.
"Unless there is some clear evidence that this continued drip feeding of negative news shows signs of abating, it is going to be very difficult to see a rebound in the share price, as shown by today's sharp falls."