RBS First-Quarter Net Loss Nearly Doubles -- 2nd Update
April 29 2016 - 5:21AM
Dow Jones News
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.
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