First RBS profit in decade clouded by costs, litigation

Executives warned restructuring costs will be about £2.5b over the next two years

Royal Bank of Scotland Group Plc swung to its first full-year profit in a decade, but the delay in settling with the US Department of Justice over a mortgage-securities probe and rising restructuring costs are casting a shadow on any celebrations. The shares fell.

Executives at the government-owned bank warned restructuring costs will be about £2.5 billion (Dh12.8 billion, $3.5 billion) over the next two years, and that it may take further charges for litigation as discussions with the US regulators remain beyond the company’s control.

The restructuring costs are partially linked to the increased use of artificial intelligence and technology, as the lender aims to catch up with its competitors.

“The digitalisation of banking is happening at a pace,” Chief Executive Officer Ross McEwan, said in a call with reporters yesterday.

“We will be spending more money to make sure that we stay up with it and lead on it as well.”

Switch to digital

In the last three years, the usage of the branch network for transactions went down about a third as clients switched to digital, he said. McEwan declined to comment on potential closure of branches and job reductions. The company shut 259 branches last December.

The lender said there is no update so far on the pending litigation with the US authorities.