RBS records £4bn loss, as SMEs chase lawsuit

Credit Strategy, 27.02.17

 

The bank’s pre-tax profit hit a deficit of £4bn for the full year of 2016 compared to a loss of £2.7bn the year before.

 

Ross McEwan, chief executive of RBS, said this reflected charges for outstanding litigation and conduct costs as well as costs associated with restructuring the bank.

 

The bank spent £2.1bn on restructuring costs for the full year of 2016, a slight decrease compared to last year’s total of £2.9bn.

 

RBS’s litigation and conduct costs increased 65 percent year-on-year, from £3.5bn in 2015 to £5.8bn in 2016.

 

McEwan said the financial impact of these costs is a difficult but necessary step in working through the bank’s legacy issues.

 

He said: “These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis.”

 

In November 2016, the bank estimated it would spend £400m to refund SMEs that claimed they were pushed into administration by the bank’s Global Restructuring Group (GRG) between 2008 and 2013.

 

James Hayward, chief executive of RGL Management Limited (RGL), the team representing these SMEs, alleged that the results statement reveals the bank’s continued whitewashing of malpractice that occurred within the GRG division.

 

He added: “The bank continues to deny responsibility for its role in the destruction of profitable businesses and is offering a derisory self-administered compensation scheme.

 

“We are looking forward to suing RBS this year on behalf of our claimants.”

 

The results statement also recorded how much RBS had written-off in regards to its UK personal banking division, as well as how much it had “written-back” – the amounts the bank had previously provisioned to be write-offs.

 

The bank wrote off £31m of “card” debt in 2016, more than triple the figure of £10m in 2015.

 

It received a £22m “write-back” in mortgage debts for 2016, a significant difference to 2015 when the bank had impairment charges of £4m against mortgages.

 

RBS declared a slight increase in its impairment charges against personal advances, including personal loans and overdrafts, rising from £69m in 2015 to £84m in 2016.

 

McEwan said he aims to have RBS back in profit by 2018, representing a significant step towards being able to start repaying UK taxpayers for their support.

 

He said: “(This is) assuming we can conclude our issues on residential mortgage-backed securities this year and resolve our residual state aid obligations.”

 

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