RBS to cut $2.5b costs after ninth hit

Net loss widened to £6.96b in 2016 from £1.98b a year earlier, UK’s largest taxpayerowned bank said

Royal Bank of Scotland Group Plc (RBS), Britain’s largest taxpayerowned bank, laid out a plan to cut costs by £2 billion ($2.5 billion, Dh9.2 billion) over the next four years as it posted its ninth straight annual loss and delayed profitability targets.

The net loss widened to £6.96 billion in 2016 from £1.98 billion a year earlier, the Edinburgh-based lender said in a statement yesterday. Excluding conduct charges and restructuring costs, operating profit was £3.67 billion, topping the £3.1 billion average estimate of seven analysts compiled by Bloomberg News.

Mired in scandals

Chief Executive Officer Ross McEwan remains mired in past scandals almost a decade after RBS required a £45.5 billion bailout from UK taxpayers, as he battles to draw a line under surging charges tied to regulatory probes and the aborted sale of the bank’s Williams & Glyn consumer unit. RBS has now accumulated more than £58 billion of losses since 2009.

“The bottom line loss we have reported today is, of course, disappointing,” McEwan said in an emailed statement. “These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis.”

The bank’s shares fell 1.5 per cent to 245.6 pence at 8.04am in London. The stock had climbed 11 per cent this year before today, after dropping 26 per cent in 2016.

It was a foregone conclusion that RBS would post its third-largest loss in the past decade, after it set aside £3.8 billion in recent weeks for a US investigation into the sale of mortgage-backed securities, while pledging to pay to boost competitors in the UK commercial banking market to meet European Union demands tied to its bailout. RBS said it now aimed to reach a 12 per cent return on tangible equity in 2020, one year later than planned.

The bank said it would face another £1 billion of restructuring charges this year, apart from additional costs tied to its plan to meet state aid obligations. RBS also expects 2017 to include most of the £800 million of losses it anticipates to come from disposing unwanted assets.

The bank said in its statement: “Consequently, we anticipate that the bank will be profitable in 2018.”