Royal Bank of Scotland losses treble to hit £7bn

Royal Bank of Scotland has today said that it made a £7bn annual loss last year, a tripling of the figure reported for 2015 and representing the ninth year of losses in a row for the still 73 per cent state-owned bank.

Losses at the bank over the last decade now stand at more than £50bn since the £45.5bn taxpayer bailout during the financial crisis.

The bottom line at the Edinburgh-based lender was hit by cash set aside to service its seemingly soon-to-be-abandoned attempt to spin off its Williams & Glyn business and pay for a huge looming fine from US authorities over pre-financial crisis toxic mortgage mis-selling.

Mis-selling and conduct costs amounted to £5.9bn in 2016, up from £3.6bn a year earlier.

RBS had previously said the settling of mis-selling cases would be largely finished by the end of last year but the largest penalties from the US mortgage scandal still hang over the lender’s accounts.

In its latest accounts RBS said it set aside £3.1bn to cover the impending US fine.

It earmarked £400m as compensation for small business owners that allegedly suffered from its controversial restructuring unit after the financial crisis.

Some £600m went towards mis-selling payment protection insurance.

The plan to substitute the selling of the Williams & Glyn business to satisfy EU state aid rules relating to its 2008 bailout for a contribution to increasing competition in the UK banking sector is to cost a further £750m.

RBS said it plans to cut costs by £2bn over the next four years, which will mean job cuts and further branch closures.

Chief executive Ross McEwan explained that the cost cuts were “huge, and unfortunately there will be job losses amongst that”.

Last week RBS moved to play down reports that it is set to slash a massive 15,000 jobs through the latest round of cuts.

“Branches have been closing and will continue to close. The shape of a branch is changing, and what people do in a branch is changing,” he added.

In the bank’s results statement, Mr McEwan said: “The bottom-line loss we have reported today is, of course, disappointing but, given the scale of the legacy issues we worked through in 2016, it should not come as a surprise.

“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.”

Mr McEwan said he expected RBS to return to profit by the end of 2018.

He stressed that once one-off charges were stripped out, the core business of the bank was making money.

Its core business, comprising commercial and retail banking, delivered its eighth successive quarter of £1bn operating profit, stripping out one-off items.

“We made good progress throughout 2016 against our strategy. Our core business generated £4.2bn in adjusted pre-tax operating profit for the year,” he said.

“This bank has great potential. We believe that by going further on cost reduction and faster on digital transformation we will deliver a simpler, safer and even more customer-focused bank.”

RBS’s bonus pool has shrunk by £30m to £343m for last year.

Mr McEwan’s total pay amounted to £3.5m, in line with the previous year.