RBS pays for scandals with £5.17bn loss
A woman walks past Royal Bank of Scotland's headquarters in the City of London. photograph: johnny green/pa
Royal Bank of Scotland has told the European Commission it is likely to miss a deadline for selling more than 300 UK branches, further undermining hopes of a rapid shake-up of Britain’s retail banking industry.
The state-controlled bank disclosed the move yesterday as it announced that a succession of scandals had helped push it into a £5.17 billion pre-tax loss in 2012, adding that it faced further fines for its role in the Libor rate-rigging affair.
Nevertheless, it said it was moving closer to reprivatisation and the resumption of dividends to shareholders. It also confirmed that it was planning a partial flotation of Citizens, its US bank.
“Our target is for 2013 to be the last big year of restructuring,” said Stephen Hester, chief executive, admitting that 2012 had been a “chastening” year.
The 2012 loss, which compared with a deficit of £1.19 billion in 2011, reflected a fresh £450 million provision to compensate customers mis-sold payment protection insurance. RBS has now set aside £2.2 billion to resolve its share of the industry-wide scandal.
It also had to set aside an extra £650 million at the end of the year to compensate small and medium-sized businesses which were mis-sold interest rate hedging products, bringing its total provision for the matter to £700 million.
The group’s £381 million settlement with US and British regulators over the Libor scandal was another headwind.
“The group continues to co-operate with other bodies in this regard and expects it will incur some additional financial penalties,” it said.
Those still looking at the matter included the European Commission and Japanese authorities, it added.
The biggest factor in RBS’s loss was an artificial £4.65 billion “own credit” loss linked to the fluctuating value of its own debt and derivative liabilities.
At an operating level – which excludes the mis-selling and the “own credit” charges, as well as other items – the bank posted a profit of £3.46 billion, up from £1.82 billion in 2011.
Mr Hester said he was hopeful the group could put its legacy of past misconduct behind it this year. The date of its reprivatisation was entirely up to the government, he added.
“The clean-up of the company should be much more evident as we go through into 2014,” he said.
More job losses were likely amid a further shrinking of RBS’s investment banking activities, he added. – Copyright The Financial Times Limited 2013