Member Article

RBS posts £5.17bn loss

Royal Bank of Scotland reported a £5.17bn pre-tax loss in its latest financial results, after a year of “chastening” for the bank.

RBS said this considerable loss was down to Payment Protection Insurance (PPI) compensation being paid out to wrongly-charged customers and fines paid for Libor rigging.

Despite significant losses, RBS still distributed a total £607m of bonuses, which included a £215m dole out to investment bankers.

The 81% government-owned bank also said it will start floating parts of its US banking firm, Citizens, which currently has around 14,700 employees.

RBS called its restructuring plans an “immense and wrenching” process, and said its ambition is to be “a really good bank-for all [its] stakeholders”, adding there was “a lot still to do.”

Chief executive, Stephen Hester, commented: “RBS is four years into its recovery plan and good progress has been made.

“We are a much smaller, more focused and stronger bank. Our target is for 2013 to be the last big year of restructuring.

“There will be important work still to do, but an increasingly sound base from which to work. As the spotlight shifts to the ‘new RBS’ post restructuring, we are determined that it will show a leading UK bank striving to be a really good bank.

“By serving customers well RBS can become one of the most respected, valued and stable of banks. That is our goal.”

Speaking via RBS’ first ever conference call with the regional press Sir Philip Hampton, the bank’s chairman, urged small and medium-sized businesses to apply for bank loans.

Sir Philip said loan applications have fallen by 19%, although the bank’s approval rate is at 90%.

When questioned about lending criteria for businesses, Sir Philip said: “Anyone with a pulse could get a loan five or six years ago. Lending standards were too low, which was wrong.

“We are keen to lend, and we’re short of lending opportunities to lend. As long as we can make an acceptable return with an acceptable risk.”

In the bank’s financial statement, RBS allocated £700m to compensate small businesses for missold complex interest rate hedging products.

Sir Philip said: “The provision we’ve made of £700m reflects at least the regulators idea of how much damage has been done. We’ve been working with the regulator very closely to understand what happened.

“Most of this is a legacy issue because most of the interest rates we sold were 2008 and before, prior to the financial crisis. Nevertheless we’ve got to clean up the mess associated with it.

“We sold this product to 8,500 business customers, […] but the provision is very substantial. That’s our best estimate of what we’ll have to pay to put businesses in the position the regulator thinks they should be in.”

This was posted in Bdaily's Members' News section by Miranda Dobson .