Published: Sat, February 25, 2017
Finance | By Laverne Griffith

Royal Bank of Scotland annual losses balloon to £7bn

Royal Bank of Scotland annual losses balloon to £7bn

The subject of the world's biggest bank rescue, RBS just announced losses of 6.96 billion pounds (8.2 billion euros) for 2016 and said it will cut costs by two billion pounds (2.37 billion euros) over the next four years.

He adds: "These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis". The restructuring costs included a £750 million provision in regards to the cancellation of the Williams & Glyn project.

"We want to grow further, with all segments contributing to this growth", chief executive Kurt Bock said after a weak performance by its oil and gas unit weighed on the group.

Over the couple years RBS has established a strong pattern of missing Street earnings views 16% of the time, according to historical earnings data, met predictions on 0 occasions and surpassed estimates 2 times over the last couple years.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "RBS is still paying for the sins of the past, though the bank is now saying that 2017 is going to be its last year in purgatory, and that shareholders can look forward to a brighter, more profitable year in 2018".

The bank also intends to invest heavily in technology at its NatWest Markets business, replacing hundred of separate product databases with a single scalable platform.

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"In 2016, provisions for litigation in the USA relating to mortgage-backed securities was the heaviest weight, costing the bank £3.1bn".

The bank has pushed back its return and cost targets by another year, aiming to reach a cost-income ratio of below 50 per cent and a return on equity of at least 12 per cent by 2020. Our customers, our cost base and the measures we plan to implement to return the bank to sustainable headline profits will be where we focus our efforts.

RBS is in now implementing a multi-year restructuring which includes asset sales, job cuts and legal actions.

In a preview, analysts at the Share Centre said: "Full year profits are expected to come in around £260m and investors will also be looking for an update on the level of mobile wagers and trading in Australia and the US". Once all the restructuring costs, fines and unwanted businesses are stripped out the bank made an underlying operating profit of GBP4.2 billion, up 4%.

The bank's current priorities are resolving a settlement with the US Department of Justice surrounding RBS' role in the financial crisis, for which other banks including Credit Suisse and Deutsche Bank have already taken signifiant hits.

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