RBS rises on news of keeping W&G unit
12-month share trading high
ROYAL Bank of Scotland Group (RBS) rose to a 12-month high in London trading after scrapping plans to sell its Williams & Glyn banking unit, removing one of the lender’s biggest obstacles to paying dividends and cutting the UK government’s stake.
Britain’s largest taxpayer-owned bank may have reached a “turning point” after running up expenses of about £1.8 billion (R29.06bn) trying to dispose of the 314-branch lender in order to meet EU antitrust rules, analysts at Deutsche Bank led by David Lock wrote in a note to clients yesterday. The shares gained as much as 6.5 percent and were up 15.4 pence to 257.8 pence as of 11am, the biggest advance among major UK banks.
Greater loss Investors are optimistic that RBS is closer to resolving some of the biggest issues that have weighed on the stock, even if it means a greater loss in 2016 results.
The bank will take a £750m provision as part of a new plan to address its EU mandate to sell Williams & Glyn. It will include paying rivals to take on its customers. The fourth quarter will also include a £3.1bn charge tied to a US probe into
sales of mortgage securities.
“Addressing these non-operating issues in 2017 should provide a clearer path towards the normalisation of the business, and also brings forward our expectations of dividend resumption to the end of 2017,” wrote Rohith Chandra-Rajan, an analyst at Barclays, in a note to investors.
Equal weight The bank was raised to equal weight from underweight by Barclays.
RBS is now expected to post a loss of about £6.5bn for 2016, according to the Deutsche Bank analysts. That would be the bank’s ninth straight annual deficit and bring total losses since the financial crisis to more than £58bn. Chief executive Ross McEwan told the Financial Times in an interview he expects the bank to return to statutory profit in 2018 after more than a decade of losses.
RBS has struggled to spin off Williams & Glyn, which it agreed to do in 2009 after receiving £45.5bn of state aid during the financial crisis. The European Commission is now considering allowing the Edinburgh-based lender to keep the unit and instead set aside money to help rival lenders lure its clients.