By Max Colchester
LONDON-- Royal Bank of Scotland Group PLC on Thursday said it
swung to a net loss in the first three months of the year, hit by a
wave of restructuring and litigation charges.
The bank, which is 80% owned by the U.K. government, was whacked
by GBP1.3 billion ($2.01 billion) of one-off costs as the lender
continues to shed its global operations and pay fines for past
misconduct.
RBS posted a net loss of GBP446 million for the first three
months of the year, compared with a GBP1.2 billion profit in the
same period last year, on revenue down 14% to GBP4.33 billion.
"This is going to be another tough year as we restructure this
bank," Chief Executive Ross McEwan said.
In February RBS said it would accelerate its retreat from 25
countries and push ahead with its plans to dismantle large parts of
its investment bank. The plans include exiting corporate and
investment-banking operations in about two dozen locations
including Hong Kong and Australia.
The continued cut back weighed on results with GBP453 million of
restructuring costs, including a provision on the value of its huge
trading floor in Stamford, Conn., which it is trying to partly
lease to other companies. Overall operating expenses shot up 20%
compared to last year as the restructuring took effect.
The bank is betting that it can clear up a host litigation
issues this year. RBS said it put another GBP334 million aside to
cover settlements over allegations that the bank tried to rig
foreign-exchange markets. Mr. McEwan said he expected the bank to
reach a settlement with U.S. authorities in the second quarter of
this year, adding that he thought the fines would be less than $1
billion.
The lender also upped its provision to cover a potential
settlement over its sale of toxic mortgage-backed securities in the
U.S. by GBP176 million to GBP2 billion. The bank is hoping to
resolve this issue in the second half of the year.
RBS had previously been on a run of good results as low interest
rates combined with strong economic growth reduced the reserves it
had to put aside to cover bad loans. In the first quarter this
trend continued, with the bank writing back some provisions.
Excluding restructuring, litigation and conduct costs, the bank
reported a 16% rise in operating profit to GBP1.6 billion compared
with last year. Analysts said that this year would prove a long
slog for the bank. Analysts at Jefferies said despite revenue being
below expectations, the improved capital position of the bank was a
source of comfort.
Write to Max Colchester at max.colchester@wsj.com
Access Investor Kit for Royal Bank of Scotland Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B7T77214
Access Investor Kit for Royal Bank of Scotland Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7800976893
Subscribe to WSJ: http://online.wsj.com?mod=djnwires