RBS slides to £446m loss as chief warns of further hits ahead
MORE fines for misconduct and litigation issues loom for Royal Bank of Scotland, its chief executive warned yesterday, as a raft of new financial provisions plunged the group back into the red.
Ross Mcewan, presenting results for the first three months of 2015, said he would only be satisfied when the bank was making a statutory pre-tax profit rather than progress at the underlying operating profit level.
But he added: “There are still many conduct and litigation hurdles looming on the horizon. We look forward to the day we can focus entirely on the future rather than dealing with legacy issues.”
RBS, still 80 per cent state-owned following its £45 billion taxpayer bailout in the financial crash, took £856 million in litigation and misconduct charges in the quarter, and £453m of restructuring costs. This led to a £446m group loss for the period, compared with a £1.2bn profit for the same period of last year. Excluding the one-off charges, the bank’s operating profits lifted 16 per cent to £1.63bn.
Mcewan also said the bank remained cautious about the prospects for financial recovery in 2015, adding that “this will be another tough year”.
Restructuring charges, as RBS continues to radically retrench its investment banking business and quits many countries, “will remain high this year and into next”, the chief executive added.
On the stock market, shares in the bank fell 11p or 3.2 per cent to 338.5p, compared with an average taxpayer buy-in price of about 500p.
The charges in the latest trading quarter to cover litigation and misconduct included an additional £334m related to the probe by the American authorities into the foreign exchange market rigging scandal. The bank has already paid £399m in penalties on the issue to UK and US regulators.
RBS said yesterday that it was in advanced talks over a settlement with the US department of justice, and hoped to settle by the end of June. Rival Barclays, which has yet to settle with any regulators over the matter, set aside a further £800m to cover the forex issue on Wednesday.
RBS’S restructuring costs in the quarter mainly related to the writedown in value of its properties in Stanford, Connecticut in the US, where its investment bank is based.
Other litigation and misconduct charges included £176m as the bank faces US legal claims over its selling of bonds backed by residential mortgages.
An extra £100m was also earmarked for British customers mis-sold payment protection insurance (PPI). RBS’S core personal and business banking arm saw profits fall £162m to £348m, partly reflecting the higher misconduct costs.
However, profit improved on an underlying basis, partly through a fall in bad debt charges and accelerating mortgage demand. The investment bank sank £741m into the red, compared with a £333m profit in the same quarter of 2014, again largely through restructuring, litigation and misconduct costs.
“For RBS, the litany of woes remains a drag on profits and prospects,” Richard Hunter, head of equities at broker Hargreaves Lansdown, said.
“All may not be lost, but the group seems currently to be a glass half empty. A sharp drop in income is largely attributable to a reduced corporate and institutional banking contribution, with even the core personal and commercial divisions being described as no more than stable.”
“For RBS the litany of woes remains a drag on profits” Richard Hunter
AN EDINBURGH-BASED company that designs and supplies spherical display systems has overseas growth in its sights after securing £600,000 worth of investment.
Pufferfish said the funding would be pumped into product development and targeting increased penetration in the US and Canada. It is setting up an office in Canada to provide a base for increasing sales into North America.
The company is investing in further development of its range of interactive spheres, which were featured earlier this year on the BBC’S Stargazing Live programme.
The cash injection has been made by Par Equity in conjunction with the Scottish Investment Bank and B-con Engineering, a Canadian optical systems manufacturer.
Pufferfish managing director Geoff Kell said: “We have just recorded our strongest quarter financially and backed by the boost of the additional funding, the time is right to up our game in the US and Canada.”
The investment comes as the firm makes changes to its board. Company growth specialist Alan Faichney comes in as chairman, replacing chair Iain Mackay who remains on the board as a nonexecutive director. Par Equity’s Paul Atkinson and Brian Creber, B-con Engineering boss, will sit on the board as investor directors.