Royal Bank of Scotland sinks to third-quarter £469m loss

Royal Bank of Scotland swung to a third-quarter loss on Friday, hit by costs related to past misconduct and restructuring that cast fresh doubts on when the British government might begin to recoup more of its 2008 emergency investment.

The Edinburgh-based bank, which is more than 70 per cent owned by the British taxpayer, reported a loss attributable to shareholders of £469 million (€520 million), compared with a profit of £940 million boosted by the disposal of US unit Citizens in the same period last year.

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

RBS also said it would miss an end-of-2017 deadline to sell its Williams & Glyn branch network, a condition of its 2008 state rescue.

“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,” chief executive Ross McEwan said.

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

The losses were 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.

Restructuring costs

The bank also reported £469 million of additional restructuring costs, largely as a result of its extended struggle to sell Williams & Glyn.

However, unlike rivals Lloyds Banking Group and Barclays, RBS did not record any provisions for repaying customers mis-sold payment protection insurance after taking a £450 million charge in the last quarter.

The bank reported higher-than-expected total income of £3.3 billion for the three months to the end of September, reflecting efforts to step up lending to maintain its status as Britain’s biggest corporate lender.

The bank 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 its near-collapse in 2008. The case is due to reach court in March.

Meanwhile, the bank continues to wait for what analysts broadly expect to be the biggest regulatory penalty in its history for its role in mis-selling US mortgage bonds.

The bank said it continued to cooperate with the US’s department of justice in its ongoing investigation but gave no guidance on when the issue might be resolved.

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

Reuters