RBS plum­mets as bank pushes out div­i­dend af­ter an­nual losses

The Pak Banker - - COMPANIES/BOSS -

Royal Bank of Scot­land Group Plc said it will take longer than orig­i­nally planned to re­sume share­holder pay­outs af­ter re­port­ing its eighth con­sec­u­tive an­nual loss, driven by costs for past mis­con­duct. The shares dropped the most since 2012.

The net loss nar­rowed to 1.98 bil­lion pounds ($2.77 bil­lion) in 2015 from 3.47 bil­lion pounds a year ear­lier, the Ed­in­burgh-based len­der said in a state­ment on Fri­day. Pre­tax profit ex­clud­ing con­duct and lit­i­ga­tion charges and re­struc­tur­ing costs fell about 28 per­cent to 4.41 bil­lion pounds, miss­ing the 4.45 bil­lion­pound av­er­age es­ti­mate in a com­pa­ny­compiled sur­vey of seven an­a­lysts. RBS last posted net in­come in 2007.

Chief Ex­ec­u­tive Of­fi­cer Ross McEwan, 58, is fac­ing a piv­otal year in his ef­forts to re­sume div­i­dends for the first time since the bank's 45.5 bil­lion-pound tax­payer-funded bailout in 2008. The bank said Fri­day out­stand­ing is­sues, in­clud­ing a po­ten­tial set­tle­ment with U.S. au­thor­i­ties over sales of mort­gage-backed se­cu­ri­ties, mean it's now "more likely that cap­i­tal dis­tri­bu­tions will re­sume later" than his orig­i­nal tar­get of the first quar­ter of 2017.

"I haven't found any nuggets of good news," said Ian Gor­don, an an­a­lyst at In­vestec Bank Plc in Lon­don with a buy rat­ing on shares. "You've got to be tak­ing a greater than one year view on cap­i­tal re­turn and a three-to-four year view on nor­mal­iza­tion of earn­ings, and that's a time­frame which ex­ceeds most in­vestors' ap­petite."

The len­der's shares dropped 8.4 per­cent to 223.4 pence at 10:19 a.m. in Lon­don af­ter ear­lier fall­ing as much as 12 per­cent in the big­gest in­tra­day de­cline since June 2012.

The stock drop came amid the de­lay and un­cer­tainty over the tim­ing and size of a po­ten­tial set­tle­ment with the U.S. Depart­ment of Jus­tice and the Fed­eral Hous­ing Fi­nance Agency over $32 bil­lion in res­i­den­tial mort­gage-backed se­cu­ri­ties sold in the run-up to the fi­nan­cial cri­sis. Chief Fi­nan­cial Of­fi­cer Ewen Steven­son said on a call with an­a­lysts that the firm isn't yet in "sub­stan­tive" talks with au­thor­i­ties and doesn't con­trol the tim­ing of a deal.

The po­ten­tial set­tle­ment is an ob­sta­cle to re­turn­ing cap­i­tal to share­hold­ers, along with sell­ing its Wil­liams & Glyn con­sumer bank, shed­ding as­sets and pass­ing stress tests from the Bank of Eng­land this year.

"Peo­ple are dis­ap­pointed," said Ge­orge God­ber, who helps to man­age about 2.8 bil­lion pounds of as­sets at Mi­ton Group Plc in Lon­don. "It's later re­turn of cap­i­tal and the mar­ket is fo­cused on in­come. You have to be cer­tain on what the value of the busi­ness is and it keeps get­ting shunted back."

RBS is be­ing "cau­tion­ary again about the tim­ing," McEwan told re­porters on a con­fer­ence call. "Clearly there are big con­duct charges we still face, not least in re­la­tion to U.S. mort­gage-backed se­cu­ri­ties. I look for­ward to the day when we can put th­ese is­sues be­hind us."

Still, the com­pany pushed fur­ther into run­ning down as­sets and said it would pay the out­stand­ing 1.2 bil­lion pounds it must give to the U.K. govern­ment re­move the state's rights to pref­er­en­tial div­i­dends in the first half of 2016.

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