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RBS reports £7bn loss and says it will not make profit until 2018 RBS reports £7bn loss and says it will not make profit until 2018
(about 1 hour later)
Royal Bank of Scotland has reported losses of £7bn for 2016, taking its losses since its 2008 government bailout to more than £58bn.Royal Bank of Scotland has reported losses of £7bn for 2016, taking its losses since its 2008 government bailout to more than £58bn.
The taxpayer-owned bank has also admitted that it will not return to profit until 2018, indicating that it will report 10 years of losses before it returns to the black. The taxpayer-backed bank has also admitted that it will not return to profit until 2018, indicating that it will report 10 years of losses before it returns to the black.
“The bottom line loss we have reported today is, of course, disappointing but given the scale of the legacy issues we worked through in 2016, it should not come as a surprise,” said the RBS chief executive, Ross McEwan. “The bottom line loss we have reported today is, of course, disappointing but given the scale of the legacy issues we worked through in 2016, it should not come as a surprise,” said the RBS chief executive, Ross McEwan, who was paid £3.5m for 2016.
The loss, the bank said, is caused by £10bn of one-off items, including £5.9bn for potential fines and legal costs. The loss, the bank said, is caused by £10bn of one-off items, including £5.9bn for potential fines and legal costs, largely related to an upcoming penalty from the US Department of Justice for mis-selling toxic bonds in the run-up to the crisis.
“These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis,” said McEwan.“These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis,” said McEwan.
More details soon ... He set out plans to cut £4bn of costs in the next four years, including £750m in 2017. While refusing to disclose how many jobs would be lost a result, the New Zealander said: “There will be job losses that we have to go through.”
Some 90,000 jobs have gone since the bank was bailed out in 2008 as it pulled out of risky businesses and sold off huge parts of its the business to take the number of employees to 80,000. Some 540 branches have been shut since 2014 to take the network – which also includes NatWest – to about 1,200.
Union officials urged the bank to slow down the cost-cutting programme and put a moratorium on branch closures. Unite national officer Rob MacGregor said: “Its ruthless approach to pay for the mistakes of the past jeopardises customer service and risks leaving communities and businesses reliant on their local bank branch high and dry.”
McEwan, who took over when Stephen Hester left in 2013, said he intended to stay in the highest profile job in UK banking to see through the return to profitability: “We’ve done all the hard work in the last three and half years. I can sense this bank is on the turn.”
His pay was the same as 2015 while the bonuses for staff fell by 8% to £343m. Some 87 bankers received more than €1m (£850,000) although the bank said the average salary was £32,620.
The two main items that McEwan is trying to resolve is the settlement with the DoJ over residential mortgage-backed securities, for which the bank took a £3.1bn hit, and the sale of 300 branches to meet state aid requirements imposed by Brussels.
Last week the Treasury announced a plan intended to free RBS of spinning out those branches, known as Williams & Glyn, although the bank admitted that this may not be resolved until the fourth quarter of the year.
Until these issues are resolved, Philip Hammond has said he will not able to sell off any of the 73% stake in the bank. Its shares fell 2% to 244p after the results were announced, more than half the 502p average price that taxpayers paid during the £45bn bailout.
The annual report lists a number of legal matters the bank is still trying to resolve including a court case by shareholders over the 2008 rights issue, the sale of interest rate hedging products to small businesses, investigations related to terrorist financing in the US and providing redress to small businesses badly treated by its now defunct global restructuring group (GRG). Last year RBS set aside £400m for GRG.