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RBS reports first profit in 10 years RBS reports first profit in 10 years
(about 1 hour later)
Royal Bank of Scotland has returned to profit for the first time in a decade as it continues its recovery.Royal Bank of Scotland has returned to profit for the first time in a decade as it continues its recovery.
Chief executive Ross McEwan told the BBC it was "a really symbolic moment."Chief executive Ross McEwan told the BBC it was "a really symbolic moment."
The bank, which is majority-owned by the taxpayer, made an annual profit of £752m compared with a £6.95bn loss the year before.The bank, which is majority-owned by the taxpayer, made an annual profit of £752m compared with a £6.95bn loss the year before.
RBS still faces a potentially massive fine from the US Department of Justice over the sale of financial products linked to risky mortgages.RBS still faces a potentially massive fine from the US Department of Justice over the sale of financial products linked to risky mortgages.
The bank had expected to settle the case in 2017, but is now hoping it will reach an agreement this year.The bank had expected to settle the case in 2017, but is now hoping it will reach an agreement this year.
RBS set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn.RBS set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn.
The issue complicates government plans to start selling down its stake in RBS.The issue complicates government plans to start selling down its stake in RBS.
"We have been constantly hit with the sins of the past with conduct and litigation issues and I've been heavily restructuring the business to bring it back to the UK," Mr McEwan said."We have been constantly hit with the sins of the past with conduct and litigation issues and I've been heavily restructuring the business to bring it back to the UK," Mr McEwan said.
The bank, which is 71%-owned by the taxpayer, has spent the past decade restructuring itself.The bank, which is 71%-owned by the taxpayer, has spent the past decade restructuring itself.
Mr McEwan said that 10 years ago RBS was the largest bank in the world, with a balance sheet of £2.2 trillion. This has now sunk to about £750bn.Mr McEwan said that 10 years ago RBS was the largest bank in the world, with a balance sheet of £2.2 trillion. This has now sunk to about £750bn.
"We've been restructuring the bank to being a really good UK/Republic of Ireland business," he told the BBC."We've been restructuring the bank to being a really good UK/Republic of Ireland business," he told the BBC.
"It's taken time but it's also taken a lot of cost to come out of countries and businesses that we just didn't want to be in."It's taken time but it's also taken a lot of cost to come out of countries and businesses that we just didn't want to be in.
"We are now operating in 12 countries as opposed to what was 38, so very focused on the UK.""We are now operating in 12 countries as opposed to what was 38, so very focused on the UK."
The return to annual profit caps a year in which RBS brought down the curtain on its so-called "bad bank" which was set up to handle toxic assets stemming from the 2008 financial crisis. For the first time, RBS published the average pay gap between men and women in the bank, which it said was at 37.2%.
However, Laith Khalaf, senior analyst at Hargreaves Lansdown, said the return to profit was "a stay of execution rather than a pardon". "Our gender pay gap reflects an under-representation of women at senior levels," the bank said in its annual report. "That is not a satisfactory position and we know that we still have much to do to narrow the gap."
He said "two big shadows still loom over RBS" - the impending US fine, and the sale of the taxpayer stake. Share sale?
The sale could cause the bank's share price to fall further, so until it this is completed, "the market isn't going to get too excited about RBS", he said. The government has said it will start selling off its shareholding by March 2019, but wants to wait for market conditions to be right before it begins.
"Indeed with the price now standing at around half of the government's breakeven point, the taxpayer's still going to come out of this nursing a significant loss," he added. Mr McEwan said that once the share sale takes off, it could take three to five years for the government to significantly reduce its stake.
RBS shares dropped more than 4% to about 269p in early trading on Friday. Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "With the price now standing at around half of the government's breakeven point, the taxpayer's still going to come out of this nursing a significant loss."
RBS shares dropped more than 4% to about 269p on Friday.
Mr Khalaf said market hopes for a dividend this year may have been depressed due to the ongoing threat of litigation from the US Department of Justice and accelerating restructuring in the business.
Critical reportCritical report
On Tuesday, after months of wrangling, MPs released a report by regulators into the mistreatment of small business customers by the bank.On Tuesday, after months of wrangling, MPs released a report by regulators into the mistreatment of small business customers by the bank.
Mr McEwan said the report "did make for really tough reading".Mr McEwan said the report "did make for really tough reading".
"We did not get it right for customers at the time they needed us when their businesses were struggling," he said."We did not get it right for customers at the time they needed us when their businesses were struggling," he said.
"We just didn't look after them well enough"."We just didn't look after them well enough".
The bank has now put in place a complaints process overseen by a former high court judge, Mr McEwan added.The bank has now put in place a complaints process overseen by a former high court judge, Mr McEwan added.