RBS predicts profit next year despite posting £7bn loss
- Author: Zachary Reyes Feb 24, 2017,
Feb 24, 2017, 12:26
Shares in Royal Bank of Scotland Group (LON:RBS) have fallen deep into the red in London this morning, as the lender, bailed out by the United Kingdom government during the financial crisis, revealed that it had made a £7-billion loss previous year, as it continued to struggle with its turbulent past.
Total income was moderately down, with the jump in losses mainly driven by a 5.9 billion charge of misconduct issues relating to its behavior in the run up to the 2007-2009 global financial crisis.
RBS has plans to cut its costs by £2bn over the next four years, branches could close and job losses could be the result of this adjustment.
Ross McEwan, the chief executive, said that despite the latest "terrible loss" RBS... The loss wasn't a surprise given that the bank announced it would set aside over £3bn in January in respect of its outstanding mortgage backed securities probe which it has yet to settle with the US Department of Justice.
Under a new policy, McEwan must hold 400 percent of salary in RBS stock, up from 250 percent.
RBS is nearly 73-percent state-owned after the lender was saved with 45.5 billion pounds in taxpayer's cash in the world's biggest banking bailout at the height of the global financial crisis.
But Mr McEwan said he expects the bank to be profitable by next year and pointed to its underlying adjusted operating profit of £4.2 billion, which strips out exceptional charges.
"We made good progress throughout 2016 against our strategy. Our core business generated £4.2 billion in adjusted pre-tax operating profit for the year - that's an average of £1 billion per quarter for the last eight quarters", he said. "We believe that by going further on cost reduction and faster on digital transformation we will deliver a simpler, safer and even more customer-focused bank".
European Union competition regulators had ordered RBS to sell the business as a condition for accepting state aid, but the bank had struggled to find a buyer.
Laith Khalaf, Senior Analyst at Hargreaves Lansdown, commented: "The botched Williams & Glyn separation has also been a costly embarrassment for RBS, which spent £700 million in 2016 to spin off the bank, on top of £750 million to fund the new plan, which totally dispenses with the need to hive off Williams & Glyn".