By Max Colchester 

LONDON-- Royal Bank of Scotland Group PLC on Friday said its net loss in the first quarter more than doubled, following hefty restructuring charges and a one-off payment to the U.K. government.

RBS reported a net loss of GBP968 million ($1.41 billion) for the period, up from GBP459 million the year before. The bottom line was hit by a GBP1.2 billion payment to the U.K. government, which grants RBS the right to resume dividend payments to ordinary shareholders. The so-called Dividend Access Share was put in place in 2009 as part of the 73% state-owned bank's bailout.

It is unclear when the bank would be in a position to pay those dividends. Chief Executive Ross McEwan on Friday said the bank wasn't changing its guidance on when it would start handing back to shareholders, a date which was previously pushed back to after the first quarter of 2017.

RBS must jump several hurdles before the payments start. These include clearing a balance sheet stress test, building a separate banking unit from scratch and paying large fines in the U.S.

"Underneath that noise you will see we are on track," Mr. McEwan said. Income was broadly flat at RBS's retail and corporate units, a trend the bank expects to continue through 2016. Investment banking revenue is set to decline as heavy restructuring continues. Restructuring costs were GBP238 million in the quarter, down 47%, compared with the same quarter in 2015. Litigation costs were also much lower.

Overall revenue dropped 13% to GBP3 billion as RBS wound down its investment bank and sold off its U.S. business.

RBS shares were broadly flat in early trading in London. Citigroup analysts said the bank missed targets on profit before tax and capital.

RBS's woes will likely continue to drag on. It must settle allegation in the U.S. that improperly sold toxic mortgage-backed securities. The fines are expected to run into many billions of pounds. There is no update on when the settlement would be reached, Mr. McEwan said.

On Thursday the bank said it may struggle to meet a regulatory deadline to split out several hundred bank branches. Following its 2008 government bailout RBS is required under European Union state aid rules to spin off 314 branches. These have been regrouped under the brand Williams & Glyn and need to be disposed of by the end of 2017. An entirely new banking platform is being built. "I don't think anyone has done anything like this before," Mr. McEwan said of the project.

The bank said it could explore other ways of shedding the branches. These include going down the route Lloyds Banking Group PLC chose when it also had to meet similar EU requirements, according to one person familiar with the matter. Lloyds created a new bank, TSB, but didn't move all its computer systems onto a new platform. Many of TSB's operations use Lloyds's technology. Another option: RBS could find a financial company which offers similar products and services and then move its customers across without creating a new bank.

Write to Max Colchester at max.colchester@wsj.com

 

(END) Dow Jones Newswires

April 29, 2016 05:06 ET (09:06 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Royal Bank of Scotland (NYSE:RBS)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Royal Bank of Scotland Charts.
Royal Bank of Scotland (NYSE:RBS)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Royal Bank of Scotland Charts.