Royal Bank of Scotland is likely to take the shine off solid progress elsewhere in the banking sector this week as it unveils further cost-cutting and losses for the ninth year running.
Chief executive Ross McEwan will look to persuade the City that the bank – still majority owned by the UK taxpayer – is close to turning the corner though more job losses are likely as it pays for the mistakes of the past.
RBS is heading in the right direction, just very slowlyLaith Khalaf
Analysts are expecting annual losses of more than £6 billion, which would be one of the group’s biggest shortfalls since its government bail-out.
RBS revealed recently it had set aside a further $3.8bn (£3.1bn) ahead of an expected levy from US authorities, which will be included in the bank’s results for the fourth quarter of 2016. It had already sunk into the red by £2.5bn for the first nine months of 2016 and the provision will see full-year losses widen substantially, adding to the losses of more than £50bn notched up over the past eight years.
This week’s results follow the news late on Friday that the Treasury had put forward plans to the European Union which could spare RBS from being forced to sell off its Williams & Glyn network.
The lender has struggled to offload the branches, which it is required to do by the end of the year under the EU’s state aid rules.
Now the Treasury and RBS have proposed an alternative £750 million plan to boost competition in the banking market in an attempt to appease officials in Brussels.
Chancellor Philip Hammond has already said the government does now not expect to offload its remaining 72 per cent stake until after 2020 and the bank has many hurdles yet to clear, with the US mortgage security mis-selling settlement still to be agreed.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said yesterday: “RBS is heading in the right direction, just very slowly. The bank is on course to report a ninth consecutive year of losses, and the light at the end of the tunnel is still obscured by US litigation and its divestment of Williams & Glyn, though progress appears to be afoot in the form of a new Treasury proposal to satisfy the European competition authorities without spinning off a new challenger bank.”
Fellow bailed-out lender Lloyds Banking Group, which reports on Wednesday, two days before RBS, is expected to finally be free of its taxpayer support this year, with the government having already whittled its stake down to less than 5 per cent.
The group is tipped to post pre-tax profits of about £4.4bn, well up on the £1.64bn haul for 2015.
Having already announced 3,000 fresh job losses at the half-year stage and a further £1bn in its third quarter figures for payment protection insurance (PPI) mis-selling, Lloyds is not set to add to those at the full-year. But attention may focus on its pay and bonuses, which are set to be revealed alongside the financial figures.