Wednesday 22 November 2017

RBS sinks to third-quarter loss on misconduct and restructuring charges

Shares in RBS fell. Photo: Philip Toscano/PA Wire
Shares in RBS fell. Photo: Philip Toscano/PA Wire

Royal Bank of Scotland swung to a third-quarter loss on Friday, hit by costs related to past misconduct and restructuring that cast fresh doubts on when the government might begin to recoup more of its 2008 emergency investment.

The Edinburgh-based bank, more than 70pc owned by the British taxpayer, reported a loss attributable to shareholders of £469m (€522m), compared with a profit of £940m boosted by the disposal of US unit Citizens in the same period last year.

The loss was more than twice the £231m loss estimated by analysts, according to a poll supplied by the bank.

RBS also said it would miss an end-2017 deadline to sell its Williams & Glyn branch network, a condition of its 2008 state rescue."We've said that 2015 and 2016 would be noisy as we work through legacy issues and transform this bank for customers. These results reflect that noise," Chief Executive Ross McEwan said in a statement.

McEwan is in the midst of a vast, multi-year restructuring of the bank, which includes asset sales, job cuts and multi-billion dollar charges to settle litigation and pay fines for historic regulatory breaches.

LOSSES

The losses were partly driven by a fresh £425m misconduct charge and an 82pc year-on-year rise in third quarter impaired loans to 144 million pounds.

The bank also reported £469m of additional restructuring costs, largely as a result of its extended struggle to sell Williams & Glyn.

But unlike rivals Lloyds Banking and Barclays, RBS did not record any provisions for repaying customers mis-sold payment protection insurance after taking a £450m charge in the last quarter.

The bank reported higher-than-expected total income of £3.3bn for the three months to the end of September, reflecting efforts to step up lending to maintain its status as Britain's biggest corporate lender.

The bank more than tripled the sum set aside to cover legal costs as it edges closer to a £4bn lawsuit brought by investors who claim they were misled into supporting a cash call just months before its near-collapse in 2008. The case is due to reach court in March.

Meanwhile, the bank continues to wait for what analysts broadly expect to be the biggest regulatory penalty in its history for its role in mis-selling US mortgage bonds.

The bank said it continues to cooperate with the US Department of Justice in its ongoing investigation but gave no guidance on when the issue might be resolved.

RBS, which succumbed to a £45.5bn state bailout during the 2007-09 financial crisis, has not made an annual profit since 2007. The government is currently sitting on a 25 billion pound-plus loss on its investment.

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