RBS plummets as bank pushes out dividend after annual losses
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.