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The rehabilitation of RBS is painful, costly – and nowhere near over The rehabilitation of RBS is painful, costly – and nowhere near over
(35 minutes later)
There goes £4.2bn from our (mostly) state-owned bank, Royal Bank of Scotland, to cover the first of two big settlements with US authorities for mis-selling toxic mortgage bonds in the bad old days. The sum to be dispatched to the US Federal Housing Finance Agency is roughly the size RBS had expected, which at least shows today’s directors are good at judging how severely their predecessors’ mistakes will be punished. There goes £4.2bn from our (mostly) state-owned bank, Royal Bank of Scotland, to cover the first of two big settlements with US authorities for mis-selling toxic mortgage bonds in the bad old days. The sum to be dispatched to the US Federal Housing Finance Agency is roughly the size RBS had expected, which at least shows that today’s directors are good at judging how severely their predecessors’ mistakes will be punished.
Throw in another billion, or two, or three, to settle later with the US Department of Justice and one of RBS’s many disgraceful chapters will close. So, yes, if one takes the cheerful view, another “legacy issue” – as the bank’s chief executive, Ross McEwan, calls them – is being resolved. Throw in another billion, or two, or three, to settle later with the US Department of Justice, and one of RBS’s many disgraceful chapters will close. So, yes, if one takes the cheerful view, another “legacy issue” – as the bank’s chief executive, Ross McEwan, calls them – is being resolved.
Bring on the dividends for us shareholders, then? Unfortunately not – or not yet. The depressing reality is that RBS still can’t say confidently when it will pay a dividend. McEwan offered a four-point checklist of necessary conditions and RBS can’t put a firm tick against any. Bring on the dividends for us shareholders, then? Unfortunately not – or not yet. The depressing reality is that RBS still can’t say confidently when it will pay a dividend. McEwan offered a four-point checklist of necessary conditions, and RBS can’t put a firm tick against any.
On mortgage-backed securities, the bank is waiting for the DoJ, which moves at its own speed. Meanwhile, the UK Treasury is trying to extract RBS from its commitment to the EU to sell 300 branches, but the plan is already five months old. Then RBS has to pass this year’s stress tests on banks’ capital buffers at a time when regulators are in a fretful mood. And then the bank has to make a profit, which we already know won’t happen this year. On mortgage-backed securities, the bank is waiting for the DoJ, which moves at its own speed. Meanwhile, the UK Treasury is trying to extract RBS from its commitment to the EU to sell 300 branches, but the plan is already five months old. Then RBS has to pass this year’s stress tests on banks’ capital buffers at a time when regulators are in a fretful mood. And the bank has to make a profit, which we already know won’t happen this year.
The City hopes profits will appear in 2018 for the first time in a decade, to allow a dividend to be paid in 2019. One wishes McEwan luck, but we’ve learned from experience with RBS to believe it only when we see it. Not for the first time, one is left with the sinking feeling that rehabilitating RBS would have been easier to manage if the bank had been split between its good and bad parts at the moment of bailout in 2008. Too late now. The City hopes that profits will appear in 2018 for the first time in a decade, to allow a dividend to be paid in 2019. One wishes McEwan luck, but we’ve learned from experience with RBS to believe it only when we see it. Not for the first time, one is left with the sinking feeling that rehabilitating RBS would have been easier to manage if the bank had been split between its good and bad parts at the moment of bailout in 2008. Too late now.
BT is stuck on the auditing merry-go-roundBT is stuck on the auditing merry-go-round
One in five shareholders in BT can’t wait to get rid of PricewaterhouseCoopers as auditor. The firm has already been told it will be fired, to be replaced by KPMG, but the effective date is next year, not this. Some 21% of investors voted against PwC anyway.One in five shareholders in BT can’t wait to get rid of PricewaterhouseCoopers as auditor. The firm has already been told it will be fired, to be replaced by KPMG, but the effective date is next year, not this. Some 21% of investors voted against PwC anyway.
You can’t blame them. The thumping £530m provision to cover “improper” practices and “financial irregularities” in BT’s Italian division came to light in January, after a whistleblower, rather than PwC, spotted the mismanagement. That shouldn’t happen at a large FTSE 100 company.You can’t blame them. The thumping £530m provision to cover “improper” practices and “financial irregularities” in BT’s Italian division came to light in January, after a whistleblower, rather than PwC, spotted the mismanagement. That shouldn’t happen at a large FTSE 100 company.
For good measure, all four members of BT’s audit committee received a minor kick in the form of votes against ranging from 8% to 12%. That’s fair, too, especially as the chair, Nick Rose, found it easier in his report to shareholders to describe the committee’s “substantial disappointment” about events in Italy than to apologise for them.For good measure, all four members of BT’s audit committee received a minor kick in the form of votes against ranging from 8% to 12%. That’s fair, too, especially as the chair, Nick Rose, found it easier in his report to shareholders to describe the committee’s “substantial disappointment” about events in Italy than to apologise for them.
Why, though, couldn’t PwC be dismissed instantly? BT says it wanted to “accelerate” the appointment of a new auditor in March, but was told by the Financial Reporting Council this was not possible under “auditor independence and tender rules”.Why, though, couldn’t PwC be dismissed instantly? BT says it wanted to “accelerate” the appointment of a new auditor in March, but was told by the Financial Reporting Council this was not possible under “auditor independence and tender rules”.
Translation: other big auditing firms had done non-auditing work for BT in the recent past and had to wait to be considered independent. Second translation: the FTSE 100 auditing world, dominated by just four big firms, is an uncompetitive stitch-up.Translation: other big auditing firms had done non-auditing work for BT in the recent past and had to wait to be considered independent. Second translation: the FTSE 100 auditing world, dominated by just four big firms, is an uncompetitive stitch-up.
SFO’s Amec investigation could alter Wood Group’s intentionsSFO’s Amec investigation could alter Wood Group’s intentions
Wood Group, the oil services firm, prides itself on being a conservative Aberdonian outfit that would not rush into a deal without assessing the risks. One hopes this self-image is justified.Wood Group, the oil services firm, prides itself on being a conservative Aberdonian outfit that would not rush into a deal without assessing the risks. One hopes this self-image is justified.
Amec Foster Wheeler, the rival Wood is in the process of buying for £2.2bn, said late on Tuesday that it was being investigated by the Serious Fraud Office. In itself, that development was not a surprise since the risk, arising from the SFO’s investigation into Unaoil, the Monaco-based energy consultant, was signalled in the merger document. The deal is still on, both sides say. Amec Foster Wheeler, the rival Wood is in the process of buying for £2.2bn, said late on Tuesday that it was being investigated by the Serious Fraud Office. In itself, that development was not a surprise, since the risk, arising from the SFO’s investigation into Unaoil, the Monaco-based energy consultant, was signalled in the merger document. The deal is still on, both sides say.
One assumes Wood is sincere and won’t try to back out. But the wording of its warning to shareholders is stark: “It is not possible to estimate reliably what effect the outcome of this matter may have on Amec Foster Wheeler.” Would you really want to proceed when you have to say that? One assumes that Wood is sincere and won’t try to back out. But the wording of its warning to shareholders is stark: “It is not possible to estimate reliably what effect the outcome of this matter may have on Amec Foster Wheeler.” Would you really want to proceed when you have to say that?