Eighth consecutive annual loss for Royal Bank of Scotland
PUBLISHED: 09:10 26 February 2016 | UPDATED: 09:10 26 February 2016
Royal Bank of Scotland has racked up its eighth year in a row of annual losses after setting aside billions of pounds for expected fines and misconduct charges.
The group, which is 73% owned by the taxpayer, posted a loss of £2billion for 2015, although this is down on the £3.5bn deficit it reported a year earlier.
The company’s bonus pool was cut by 11% to £373million for 2015, while chief executive Ross McEwan said he will not take a £1m “role-based” incentive, which is paid on top of salaries by some banks.
Mr McEwan added that in 2016 he will give half of his role-based pay to charity in a bid to defuse what has become an annual pay row at the taxpayer-backed lender.
It will be the third year in a row that the New Zealander, whose base salary is a £1m a year, will have voluntarily forfeited part of his pay package.
The losses at RBS come after it said last month it would set aside billions to cover past mistakes as part of a raft of mammoth financial provisions.
The bank said it has set aside £3.6bn in conduct charges, including £2.1b to cover expected legal action on US residential mortgage-backed securities and a further £600m for payment protection insurance (PPI) mis-selling compensation.
RBS also said it had amassed restructuring costs of £2.9bn last year, as it sold off its investment banking and overseas operations to become a smaller and less complex lender. It plans to exit 25 of the 38 countries it has a presence in to focus predominantly on the UK and Ireland.
Even stripping out one-off charges, RBS’s adjusted operating profit fell to £4.4bn compared with £6.1bn 12 months ago, reflecting its smaller size.
However, Mr McEwan said: “RBS made progress again in 2015. We ended the year a simpler, stronger bank with a business anchored squarely in the UK and Ireland, focused on retail and commercial markets.”
The bank said it cut costs by £983m last year, beating its target of £900m. The firm’s common equity tier 1 ratio, a key measure of the assets a bank hold in its reserves, lifted 4.3% to 15.5% over the year and it also boosted net mortgage lending by 10% on a year ago to £9.3bn.
RBS also plans to sell its 316-branch Williams & Glyn UK retail banking business which could fetch as much as £1.5bn, although there are fears this cold be delayed to beyond the first quarter of 2017 as a result of the current turmoil in the markets.
Chancellor George Osborne sold a 5.4% stake in RBS to the City last August, raising £2.1bn, but making a £1.1bn loss on what taxpayers had paid for them.
In January this year, however, Mr Osborne suspended the Government’s final stake in Lloyds Banking Group, of just under 10%, due to the market turmoil. Analysts do not expect any resumption in the sale of Government stakes of RBS or Lloyds soon.
Earlier this week, Lloyds reported a 7% fall in bottom-line pre-tax profits to £1.64bn in 2015, from £1.76bn in 2014,
after taking another £2.1bn hit for PPI mis-selling. However, stripping out PPI and other one-off costs, underlying profits rose 5% to £8.1bn.