The sins of the past continue to hammer British lender Royal Bank of Scotland.
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.
RBS is in the midst of a vast, multi-year restructuring which includes asset sales, job cuts and mopping up from a series of legal scandals.
“This is a strong core bank getting masked by all the sins of the past,” Chief Executive Ross McEwan said on a conference call with reporters.
RBS (@RBS) February 24, 2017
Staff pay the price
Independent market analyst Jeremy Batstone-Carr said the staff who will be laid off as part of those cost cuts are paying for those scandals: “You end up feeling extremely sorry for Royal Bank of Scotland staff, many of whom I suspect are going to lose their jobs as a result of further cost cutting measures announced today. They continue to pay the price for the problems the bank encountered in the wake of the excesses of 10 years ago.”
Day-to-day RBS is now making money – pre-tax operating profit was 4.24 billion pounds (5.01 billion euros) – but it is having to set aside billions to pay anticipated fines for misselling of sub-prime mortgage linked investments before 2007, which was the last time the bank made a profit.
Since then it has lost 58 billion pounds (68 billion euros).
Analysts have estimated the bank could have to pay the US Department of Justice as much as nine billion pounds (10.64 billion euros) this year.
RBS said it will probably return to profit in 2018
The British government, which owns more than 70 percent of RBS after the bailout with taxpayer money, has said it will not resume selling its stake until the bank settles its US fines and resolves its state aid requirements.