It's now nine years and counting as Royal Bank of Scotland announced its ninth successive annual loss. It wasn't a surprise after the bank announced it would set aside over £3bn in January in respect of its outstanding mortgage-backed securities probe, which it has yet to settle with the US Department of Justice.
Management expressed the hope that this particular issue will be settled in the not too distant future.
The loss this year was just shy of £7bn and brings the total losses up to £58bn since the bank was bailed out back in 2008. £5.9bn of the loss was in relation to further provisions in relation to conduct charges, while the bank also set aside another £201m in respect of PPI in Q4.
In response the bank has announced another large scale cost cutting program to the tune of £2bn over the rest of the decade, with branch closures as well as back and middle office jobs the most vulnerable. This wasn’t totally unexpected as there had been whispers doing the rounds over the past month or so that some significant restructuring was likely to take place in the wake of these results, and further likely losses.
It is still likely to be a significant blow to staff morale though given that headcount has already fallen from 145,000 jobs in 2007 to around 80,000 now.
Once again the underlying business has performed well posting an annual operating profit of £3.67bn coming in above an estimated £3.31bn and revenues were also above expectations at £12.4bn.
CEO Ross McEwan must feel that he is trapped in a dystopian nightmare with RBS as no sooner does he overcome one obstacle than he encounters another. On the plus side there is the prospect that the nightmare of what to do with the Williams and Glyns branches is likely to see a conclusion.
In comments that accompanied today’s results Ross McEwan stated that “these costs are a reminder of what happens when things go wrong”, which is somewhat of an understatement. So far we’ve had nine reminders of the costs of what happens when things going wrong and Mr McEwan like the rest of us must be hoping that we don’t get a tenth.
Management expressed optimism that the bank would return to profit in 2018, in language that has an all too familiar ring to it. Let’s hope this year’s optimism is not misplaced.
Whatever happens it is quite clear that any return to paying a dividend remains some way off, and while today’s losses weren’t too much of a surprise it would appear investor reaction to the numbers has been relatively cool with the shares slipping back in early trade.
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