TAXPAYER-owned Royal Bank of Scotland expects to return to profit next year after reporting a £7 billion annual loss and a cost-cutting drive that is expected to result in thousands of job losses.
It was the bank’s ninth consecutive yearly loss – a hefty increase on the £2bn the lender reported last year – and one of the group’s biggest losses since the £45.5bn government bail out in 2008.
Chief executive Ross McEwan yesterday revealed he has ordered a £2bn four-year cost-cutting drive, including £750 million of savings this year. He refused to be drawn on how many jobs will be lost, but a figure as high as 15,000 has previously been estimated.
McEwan said: “There will be job losses that we will have to go through to get this business back into shape. I will not give job numbers out, I’ll talk to staff first before anyone else. The £2bn needs to come out and will be broad-ranging – people, property, across the board.”
The New Zealander also addressed speculation surrounding his own position.
When asked if he expects to still be at RBS next year, he said: “I hope so. We have done a lot of hard work, and I sense this bank is on the turn. It’s my strategy, I’d like to see it concluded.”
Yesterday’s figures take into account £10bn in legacy costs – including £5.9bn on conduct charges and a £2.1bn restructuring hit. The group has also set aside another £3.1bn ahead of an expected fine from US authorities, linked to the sale of mortgage-backed securities, which was included in its results.
RBS has now notched up losses of more than £55bn over the past eight years and it is still not out of the woods. Shares fell by more than five per cent during trading yesterday, and closed down 1.6 per cent.
McEwan added: “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.”
However, he said he expects the bank to be profitable by next year and pointed to its underlying adjusted operating profit of £4.2bn, which strips out exceptional charges.
The Unite union, which represents many bank staff, warned RBS it was cutting too far to pay for the “reckless greed” of the past, and called for a moratorium on closures and job cuts. It acknowledged changing banking habits, but said staff and customers were paying for the legacy of Fred “the shred” Goodwin – who led RBS to its near-collapse.
Rob MacGregor, Unite’s national officer, said: “Workers in finance continue to pay the price for the reckless greed and ambition of the past. Nearly 10 years on, shamed banker Fred Goodwin’s legacy haunts RBS employees and their families. Having closed over 520 branches since 2014, RBS is chief among its competitors in shutting branches and slashing jobs. Its ruthless approach to pay for the mistakes of the past jeopardises customer service and risks leaving communities and businesses reliant on their local bank branch high and dry.
“After nine years of constant flux, taxpayers who still hold the majority of the shares in RBS, along with loyal staff and customers are left wondering when and where it is going to end.”
James Hayward, CEO of RGL Management, which represents former RBS clients who are suing it over the behaviour of its now-defunct Global Restructuring Group (GRG), added: “The RBS annual report reveals the bank’s continued whitewashing of malpractice that occurred within the GRG division. Despite evidence of forgery, fraud and other wrongdoing by RBS, the bank continues to deny responsibility for its role in the destruction of profitable businesses and is offering a derisory self-administered compensation scheme. We are looking forward to suing RBS this year.”
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