Spin-off is ditched as RBS loses £2bn in six months
TROUBLED Royal Bank of Scotland suffered a half-yearly loss of £2billion after racking up £1.3billion in legal costs linked to a series of financial scandals.
The worse-than-expected losses, which have ballooned from £179million last year, saw RBS ditch the launch of its spin-off ‘challenger’ bank Williams & Glyn after months of IT complications.
The state-backed lender now plans to sell off that 300-branch High Street bank employing 5,500, with Santander UK understood to be a potential buyer.
RBS, which also owns NatWest, is on course for its ninth consecutive year of losses. They have reached £52billion since the bank was bailed out by the Government in 2008.
Stormy waters may still lie ahead for RBS, which is 73 per cent owned by the taxpayer, after it agreed to pass on the Bank of England’s latest cut in interest rates to its borrowers. The cut to 0.25 per cent is likely to impede the bank’s ability to generate profits as quickly as it hoped.
Bank of England governor Mark Carney told bankers on Thursday, as he unveiled a package of measures to tackle a post-Brexit vote downturn in the economy, that they had ‘no excuse’ not to pass on the cut.
Ross McEwan, RBS chief executive, said rate cuts ‘hit savers every time’ and pointed out that the majority of its home owners were borrowing on fixed rates and would not be affected.
Mr McEwan blamed the latest set of poor figures on ‘legacy issues’, including mis-selling payment protection insurance (PPI) to customers and litigation related to a £12billion rights issue in 2008 during the financial crisis.
The bank boss said he had tried to sort out as many of these issues as possible over the past two years, although he admitted that there would be ‘some hangover’ in 2017.
Mr McEwan insisted RBS was ‘well positioned’ for a potential economic slowdown, saying: ‘We’ve got a very strong bank here that can take these shocks.’
He added: ‘We’re at the midway point in our five-year plan and we’re making good progress. We are clearly in phase two of our strategy where our focus is on drawing a line under many of the legacy issues that have plagued this bank, and transforming the core business so we can deliver consistent, sustainable profits and results for our shareholders and do great things for our customers.’
Neil Wilson, markets analyst at ETX Capital, said the bank was running out of excuses.
He added: ‘RBS just moves from one disaster to the next. This time it’s “legacy issues”, but after eight and a half years since being bailed out, it’s time to move on.
‘The loss in the first half comes after eight straight years of annual losses. It’s now very much odds-on to make that nine in a row – a startlingly bad run of results for any company, let alone a bank.’
Shares in RBS finished the day down 4.3 per cent to 183.7p.
‘One disaster to the next’