PROBLEMS are continuing to mount for Royal Bank of Scotland, which yesterday reported a first-quarter pre-tax loss of £968 million – more than double last year’s figure of £446m.
RBS – which is facing difficulties selling off its Williams & Glyn network to comply with a European Union demand – also revealed that Swiss authorities are scrutinising its Coutts subsidiary following last year’s disclosure that German prosecutors were investigating current and former staff of Coutts’s Zurich and Geneva offices.
Coutts provides banking services for wealthy individuals, but the tax-payer-owned RBS sold this international arm to the family-owned Swiss private bank Union Bancaire Privée earlier this year.
It said Switzerland’s regulator, the Swiss Financial Market Supervisory Authority, had “opened enforcement proceedings against Coutts & Co Ltd (Coutts), a member of the RBS Group incorporated in Switzerland, with regard to certain client accounts held with Coutts”.
RBS has also not escaped the Panama Papers scandal, the leak of 11.5m documents from the law firm Mossack Fonesca – and has, like other banks – been asked for information by the Financial Conduct Authority. In legal notices attached to its results, RBS said it had “responded to the FCA setting out details of the limited services provided to Mossack Fonseca and its clients and is continuing its internal review, as well as monitoring all new information published”.
The bank’s near £1 billion loss reflects the impact of its £1.2bn payment to the Treasury last month to buy out a crucial part of its £45bn bailout. That payment ended a dividend access share (DAS) agreement with the Government which was put in place seven years ago, and prevented it paying dividends to any shareholders before the Treasury. The DAS was to ensure that the Government was repaid first as the bank’s financial position improved.
In effect, RBS has spent a lot of money and reported a huge loss in its first quarter so it could start giving shareholders some reward.
However, it said: “RBS remains on track with its plan to build a strong, simple, fair bank for customers and shareholders.” RBS income fell from £3.5bn to £3bn following the sale of its Citizens business in the US and the decision to dramatically scale back its overseas and investment banking activities.
The cost of restructuring came in at £238m, with RBS expecting the figure to grow to £1bn for the year.
RBS chief executive Ross McEwan said: “Today’s results show the strength and resilience of the bank we are fast becoming.
“This bank has great brands and great market positions and, piece by piece, we are building a solidly performing, profitable bank doing great things for customers and returning value for shareholders.
“One quarter in, capital remains strong, costs continue to fall, our customer scores are improving and we’re seeing growth in the businesses and the markets we like.”
Late on Thursday, RBS warned of a bigger-than-expected hit from plans to spin off Williams & Glyn.
There was also a “significant risk” that it would not meet the deadline to separate the 316-branch Williams & Glyn business by the end of 2017.
It is now looking at other ways to spin off the business, adding that the “overall financial impact on RBS is now likely to be significantly greater than previously estimated” due to the complexities of separating the business.
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