This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/2017/feb/24/rbs-loss-profit-bank

The article has changed 4 times. There is an RSS feed of changes available.

Version 2 Version 3
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 11 hours 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 a new £7bn loss – its ninth consecutive year deep in the red – which has taken its total losses since the 2008 financial crash to more than £58bn.
The taxpayer-backed bank has also admitted it will not return to profit until 2018, indicating that it will report 10 years of losses before it returns to the black. The 73% taxpayer-owned bank said it would not return to profit until 2018 and announced a £2bn cost-cutting plan, which will mean more job losses and branch closures to put the bank back in 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, who was paid £3.5m for 2016. Ross McEwan, the chief executive who was paid £3.5m last year, said: “The bottom line loss we have reportedis, of course, disappointing but given the scale of the legacy issues we worked through in 2016, it should not come as a surprise.”
The loss, the bank said, was 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. The 2016 loss was caused by £10bn of one-off items, including £5.9bn set aside for looming fines and legal costs, largely related to a forthcoming penalty from the US Department of Justice (DoJ) for mis-selling toxic bonds in the run-up to the financial 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. McEwan pointed the finger of blame for the continuing losses at the regime of former RBS boss Fred Goodwin, who was in charge of the bank when it needed a taxpayer bailout: “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.”
“This is a bank that has been on a remarkable journey. We still have further to go. But the next three years will not be the same as the past three,” he added. He added: “This is a bank that has been on a remarkable journey. We still have further to go. But the next three years will not be the same as the past three.”
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.” Once one of the biggest banks in the world, RBS has embarked on a dramatic downsizing since the crisis. Staff numbers have fallen from 170,000 to 80,000 and McEwan conceded that his latest plan to cut cost – including £750m in 2017 – would lead to cuts in branches and jobs.
Ninety thousand 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 reduce the number of employees to 80,000. Five hundred and 40 branches have been shut since 2014 to take the network – which also includes NatWest – to about 1,200. While refusing to disclose the scale of redundancies, McEwan admitted: “There will be job losses that we have to go through.”
Union officials urged the bank to slow down the cost-cutting programme and put a moratorium on branch closures. The 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.” Union officials urged RBS to introduce a moratorium on branch closures. The bank has 1,200 RBS and NatWest branches, not including 300 branches that the EU had demanded it should sell in return for its state bailout.
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.” Rob MacGregor, the Unite union’s national officer, 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.”
His pay was the same as 2015 while the bonuses for staff fell by 8% to £343m. Eighty-seven bankers received more than €1m (£850,000) although the bank said the average salary was £32,620. McEwan, who took over when Stephen Hester left in 2013, said he intended to stay at RBS until the bank was back in the black: “We’ve done all the hard work in the last three and half years. I can sense this bank is on the turn.”
The two main items McEwan is trying to resolve is the settlement with the US Department of Justice 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. His £3.5m pay was the same as 2015 while bonuses for staff fell 8% to £343m. A total of 87 RBS bankers received more than €1m (£850,000). However, the bank said the average salary across the organisation was £32,620. The bank also handed £496,000 to its previous boss Hester, three years after he quit the bank, as a final payment.
Last week, the Treasury announced a plan intended to free RBS of spinning out those branches, known as Williams & Glyn, although the bank admitted 0 this may not be resolved until the fourth quarter of the year. Chairman Sir Howard Davies said McEwan and current bank staff should not be penalised for “sins of the past”, but the Robin Hood Tax Campaign, which campaigns for a tax on banks to tackle poverty and climate change, described the payments as an insult.
Until these issues are resolved, the chancellor, Philip Hammond, has said he will not be 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 two main issues hanging over RBS is settlement with the DoJ and the sale of 300 branches – known as Williams & Glyn. The Treasury hopes that sale can now be avoided by other measures to inject competition into the small business market, although these may not be approved by Brussels until later this year.
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. Until these problems are resolved, the chancellor, Philip Hammond, has said he will not be able sell off RBS shares, which fell 4% to 246p on news of the latest loss. That is less than half the 502p average price that taxpayers paid for them. “While progress is being made, there is still work to do and RBS must continue to deal with its legacy issues,” a Treasury spokesperson said.
The annual report lists a range of legal matters, including a case by shareholders over the 2008 rights issue. RBS intends to fight the case which McEwan said “ could go on for years”. RBS has settled with four other shareholder groups and set aside £800m. McEwan was critical of former directors attempting to join the proceedings.
Among other items weighing on the bank are compensation for 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. RBS has set aside £400m for GRG.
“RBS is showing a bit of top-line income growth in its core UK banking operations,” said Sandy Chen at Cenkos, an independent specialist securities firm.