Tenth year of losses looms for troubled RBS

Tthe US Department of Justice claims RBS mis-sold risky mortgage-backed securities in the run-up to the financial crash. Photograph: Philip Toscano/PA
Tthe US Department of Justice claims RBS mis-sold risky mortgage-backed securities in the run-up to the financial crash. Photograph: Philip Toscano/PA
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Royal Bank of Scotland could unveil its tenth successive year of losses this week, depending on whether or not it is hit by a pending settlement with the US Department of Justice (DoJ) over sub-prime mis-lending.

City consensus figures suggest an attributable loss for RBS of about £590 million for 2017, following a £6.95 billion loss the previous year and nearly £59bn of cumulative losses since 2008.

Conduct and litigation costs are expected to come in at £2.7bn for last year amid speculation that a deal may be imminent with the DoJ over claims the bank mis-sold risky mortgage-backed securities in the run-up to the financial crash. City expectations of the fine range from $3bn to $18bn.

Michael Hewson, chief market analyst at CMC Markets, said: “RBS management have been careful to downplay the prospect that we could see the first annual profit in this particular decade, probably a wise course of action given the bank’s current woes.

“The bank may choose to set aside further provision to help cushion the final settlement into next year’s numbers, with the fine rumoured to be in the region of $10bn.”

Like other of the Big Five banks, RBS is expected to take a bad debt hit from the recent collapse of services and construction giant Carillion when it reports on Friday.

However, it is thought less likely that the bank – still 72 per cent owned by the state – will need to take an extra provision on top of the £400m it has already set aside to refund small business customers who were mistreated by its now-disbanded Global Restructuring Group (GRG) division. A long-delayed report by the Financial Conduct Authority into GRG’s failings was delivered to the Treasury select committee on Friday after the committee chair, Nicky Morgan, set the financial regulator a deadline.

Lloyds Banking Group, owner of Bank of Scotland, reports its results on Wednesday when boss Antonio Horta-Osorio will also unveil his three-year strategic plan for the group.

Lloyds, which came totally out of taxpayer part-ownership in 2017, is expected to announce a strong uplift in profits for the year. Investment bank Credit Suisse has forecast a 37 per cent surge in Lloyds’ earnings to £5.8bn from £4.2bn in 2016.

Barclays is also set to post a healthy rise in profits to £4.7bn, up from £3.2bn, on Thursday.

A spotlight will fall on the lender’s investment banking division after it disappointed in the third quarter, partly due to lower market volatility.

The Serious Fraud Office last week charged Barclays Bank with unlawful financial assistance in connection with a $3bn loan given to the state of Qatar linked to its emergency fundraising during the financial crisis.