RBS posts Q3 loss of £469m on restructuring, litigation costs
London
ROYAL Bank of Scotland Group Plc, Britain's biggest government-owned lender, swung to a loss in the third quarter as the bank took £894 million (S$1.51 billion) in charges for restructuring and litigation.
The net loss of £469 million compared to a profit of £940 million a year earlier, the Edinburgh-based lender said in a statement on Friday. Pretax profit, excluding one-time costs, rose to £1.33 billion, beating the £776 million average estimate of seven analysts compiled by Bloomberg.
Three years into his tenure, chief executive officer Ross Mc-Ewan is little closer to returning the recipient of the UK's biggest banking bailout back to annual profit. His progress at shrinking the former global titan to focus on domestic markets remains overshadowed by looming US charges for past misconduct and delays in a plan to sell the Williams & Glyn consumer unit.
"We've said that 2015 and 2016 would be noisy as we work through legacy issues and transform this bank for customers," Mr McEwan said in a statement. "These results reflect that noise. Our core business results were good with a £1.3 billion adjusted operating profit, our best quarter since 2014." The bank also wrote down its deferred tax assets by £300 million, citing new UK rules and a weaker outlook.
RBS's corporate and institutional banking division, which houses debt trading, recorded a 71 per cent increase in adjusted revenue to £526 million, driven by rates trading. Revenue from the rates business more than doubled to £348 million from the same period a year ago.
The common Tier 1 equity capital ratio of financial strength rose to 15 per cent from 14.5 per cent at the end of June. Although Mr McEwan has pledged to return excess cash above 13 per cent to shareholders, potential past misconduct costs make it difficult to assess how much spare capital the bank will have. RBS won't pay a dividend until it has cleared the bulk of its restructuring, passed Bank of England stress tests due next month, settled the US mortgage probes and made progress in divesting Williams & Glyn.
The bank's net interest margin, the difference between income from lending and the cost of funding, fell to 2.17 per cent from 2.21 per cent at the end of June.
RBS is the worst-performing large UK bank this year with the shares down about 35 per cent in London trading, trailing the 407 pence a share breakeven price of the government's bailout during the financial crisis. BLOOMBERG
