Eighth consecutive annual loss for Royal Bank of Scotland
- Credit: PA
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.
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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.
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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.