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RBS plans move to Amsterdam for post-Brexit EU hub RBS plans move to Amsterdam for post-Brexit EU hub
(about 9 hours later)
Royal Bank of Scotland is in discussions about using Amsterdam as its post-Brexit EU hub and has revealed it is being investigated for potential breaches of money laundering rules. Royal Bank of Scotland is considering using Amsterdam as its post-Brexit EU hub and has revealed it is being investigated for potential breaches of money laundering rules.
The bailed-out bank made the announcement as it reported it had made a profit in the first six months of the year. It is the first half-year profit for the bank – in which the taxpayer still owns a 71% stake – for three years. The the 71% taxpayer-owned bank made the announcements as it reported its first half-year profit for three years. The £939m profit compares with a £2bn loss a year ago, although the chief executive, Ross McEwan, warned a full-year loss was likely, which would be the 10th consecutive year of annual losses since its 2008 bailout.
The £939m of profits compares with a £2bn loss a year ago, although the bank’s chief executive, Ross McEwan, warned a full-year loss was likely. The bank signalled that more jobs could be cut on top of the 14,200 – about 15% of the workforce – which have gone in the last 12 months. These job losses reduced costs which helped boost profits, as did a better performance at its investment banking business, NatWest Market.
The bank said its NatWest Markets arm – the rump of its investment banking business – was reviewing plans to “minimise disruption to the business and continue to serve its customers well in the event of any loss of EU passporting”. It is in advanced discussions with the Dutch national bank about setting up a small European headquarters in the Netherlands, where it already holds a banking licence – a legacy of its takeover of Dutch bank ABN Amro a decade ago. The Amsterdam office is for the NatWest Markets arm, and advanced discussions are under way with the Dutch national bank. RBS already holds a banking licence in the Netherlands – a legacy of its takeover of the Dutch bank ABN Amro – and needs to beef up its presence there to “minimise disruption to the business” after Brexit.
The hub could employ 150 staff, RBS said, although it may not be necessary to move staff to Amsterdam as some could remain in London. The cost of setting up the operation will be in the “tens of millions”. The operation could need 150 people, RBS said, although it may not be necessary to move all staff from London. The cost of setting up the hub will be in the “tens of millions”.
The legal warnings attached to results included information about an investigation by the Financial Conduct Authority into compliance with money laundering rules. Meanwhile, the news of the investigation into potential breaches of money laundering rules was contained in the more than 15 pages of legal warnings attached to the results.
“On 21 July 2017, the FCA notified RBS that it is undertaking an investigation into RBS plc’s compliance with the money-laundering regulations 2007 in relation to certain customers. RBS is cooperating with the investigation,” the bank said. “On 21 July 2017, the FCA [Financial Conduct Authority] notified RBS that it is undertaking an investigation into RBS plc’s compliance with the money laundering regulations 2007 in relation to certain customers. RBS is cooperating with the investigation,” the bank said, without providing further details.
McEwan would not elaborate. There was a separate disclosure – amid more than 16 pages of legal warnings – relating to a previously announced investigation into allegations that Britain’s banks processed vast amounts of tainted money from Russian criminals without noticing. There was a separate disclosure about a previously announced investigation into allegations that Britain’s banks processed vast amounts of tainted money from Russian criminals.
McEwan said the results demonstrated the investment case for the bank, which is important if the UK chancellor, Philip Hammond, is to be able to sell off any more shares.
“We’re doing what we said we would at our full-year results in February – growing income, reducing cost and improving returns for shareholders, while also starting to deliver a better service for customers,” said McEwan. But McEwan said: “Our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced.”
“We see the first six months of this year as proof of the investment case for this bank: our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced,” he added. He added: “It does feel this business is seeing the light at the tunnel,” but said the one major outstanding issue was settlement with the US Department of Justice over the sale of toxic mortgage bonds a decade ago. He hopes for a resolution before the end of the year.
But a loss is likely by the end of the year as the bank is braced for a settlement with the Department of Justice in the US over the way it sold toxic mortgage bonds in the run-up to the crisis. Last month, the bank reached a deal with another US body, the Federal Housing Finance Agency, to pay $5.5bn (£4.2bn). Sir Howard Davies, the bank’s chairman, is among senior figures in Brexit discussions with the government. Davies said there was now a recognition of the potential for “some quite serious consequences for London which could happen in a very rapid and unplanned way if we don’t get some transition agreements”.
Another loss at the full year would mean the bank will have made 10 consecutive years of annual losses since its 2008 bailout. He said the bank had just started to detect “signs of hesitancy” among corporate customers, especially manufacturers. “We’re seeing people sitting on their hands a bit,” he said. On Thursday, the governor of the Bank of England, Mark Carney, said Brexit was starting to affect business decisions.
The government has only managed to sell off a small part of its stake. In August 2015, a 5% stake was sold at a £1bn loss. But McEwan said the results demonstrated a reason to own RBS shares, which is important if the chancellor, Philip Hammond, is to be able to sell off any more on top of the 5% stake sold in August 2015 at a £1bn loss.
A number of issues have stood in the way of a sell-off, according to the chancellor, including the toxic bond scandal. However, another issue, the uncertainty about the sale of 300 branches as mandated by the EU at the time of its bailout, has now been resolved under a deal with Brussels over alternative ways to beef up competition for small businesses. In April, though, Hammond signalled that the shares could be sold at a loss saying “we have to live in the real world”. McEwan said the decision to sell was the government’s and Hammond has previously cited the DoJ settlement as an impediment to a sale but also signalled that the shares could be sold at a loss.
RBS shares were up nearly 4% – the biggest risers in early trading, at 265.9p – still well below the average price per share of 502p during its bailout in 2008 and 2009. The Treasury repeated a statement that it would “continue to seek opportunities for disposals, but the need to resolve legacy issues makes it uncertain as to when these will occur.”
The results were bolstered by a fall in costs as 14,200 staff – about 15% of the workforce which now stands at 75,000 – left the business. Unlike its rivals the bank did not take an extra provision for payment protection insurance mis-selling, while operating profits at NatWest Markets were 75% higher. It added: “There is still work to do but RBS is continuing to implement its strategy and is making good progress in dealing with the problems of the past.”
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said that until mistakes of the past were resolved “all the good work that RBS has done will continue to get lost in the noise”.
“The core businesses are delivering steady income growth thanks to growing activity and costs look to be falling,” said Hyett.
RBS shares closed at 261.2p, up 1.9% but still well below the average price per share of 502p during its bailout in 2008 and 2009.