Misconduct costs push RBS to Q3 loss of $794m

RBS is in the midst of a vast multi-year restructuring, which includes asset sales, job cuts and multibillion-dollar charges to settle litigation and pay fines for regulatory breaches.
RBS is in the midst of a vast multi-year restructuring, which includes asset sales, job cuts and multibillion-dollar charges to settle litigation and pay fines for regulatory breaches.PHOTO: AGENCE FRANCE-PRESSE

LONDON • Higher misconduct costs and restructuring charges led to a third-quarter loss at the Royal Bank of Scotland (RBS), casting fresh doubt on when the British government will recoup its 2008 bailout cash.

The Edinburgh-based bank, which is still more than 70 per cent owned by British taxpayers, reported a net loss of £469 million (S$794 million), compared with a profit of £940 million, boosted by the sale of US unit Citizens, in the same period last year.

The loss was more than twice the £231 million estimated by analysts, according to a poll supplied by the bank.

In a further sign of the many problems still facing chief executive Ross McEwan, RBS also said it would miss an end-2017 deadline to sell its Williams & Glyn branch network, which was a condition of its 2008 state rescue.

The bank's seven-year struggle to sell the unit accounted for £301 million of a £469 million restructuring charge booked during the quarter, it said.

Mr McEwan is in the midst of a vast multi-year restructuring of RBS, which includes asset sales, job cuts and multibillion-dollar charges to settle litigation and pay fines for regulatory breaches.

"We've said that 2015 and 2016 would be noisy as we work through legacy issues and transform this bank for customers. These results reflect that noise," Mr McEwan said in a statement.

The loss was partly driven by a fresh £425 million misconduct charge and an 82 per cent year-on-year rise in third-quarter impaired loans to £144 million.

Investors cheered higher-than- expected total income of £3.3 billion as RBS stepped up mortgage and business loans to maintain its status as Britain's biggest corporate lender.

But while the near-term performance impressed some, others were less optimistic about the future.

"While the results themselves were better than expected, guidance on the outlook is more disappointing," said Mr Gary Greenwood, an analyst at Shore Capital.

RBS more than tripled the sum set aside to cover legal costs as it edges closer to a £4 billion lawsuit brought by investors who claim they were misled into supporting a cash call just months before the bank's near-collapse in 2008.

The bank is also waiting for what is likely to be the biggest regulatory penalty in its history for its role in mis-selling US mortgage bonds. It said it continued to cooperate with the US Department of Justice, but gave no guidance on the timing of a settlement.

RBS, which succumbed to a £45.5 billion state bailout during the 2007-09 financial crisis, has not made an annual profit since 2007.

The British government is sitting on a £25 billion-plus loss on its investment.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 29, 2016, with the headline 'Misconduct costs push RBS to Q3 loss of $794m'. Print Edition | Subscribe