(qlmbusinessnews.com via bbc.co.uk – – Fri, 23 Feb 2018) London, Uk – –
Royal Bank of Scotland has returned to profit for the first time in a decade as it continues its recovery.
Chief executive Ross McEwan told the BBC it was “a really symbolic moment.”
The bank, which is majority-owned by the taxpayer, made an annual profit of £752m compared with a £6.95bn loss the year before.
RBS still faces a potentially massive fine from the US Department of Justice over the sale of financial products linked to risky mortgages.
The bank had expected to settle the case in 2017, but is now hoping it will reach an agreement this year.
RBS set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn.
The issue complicates government plans to start selling down its stake in RBS.
“We have been constantly hit with the sins of the past with conduct and litigation issues and I’ve been heavily restructuring the business to bring it back to the UK,” Mr McEwan said.
The bank, which is 71%-owned by the taxpayer, has spent the past decade restructuring itself.
Mr McEwan said that 10 years ago RBS was the largest bank in the world, with a balance sheet of £2.2 trillion. This has now sunk to about £750bn.
“We’ve been restructuring the bank to being a really good UK/Republic of Ireland business,” he told the BBC.
“It’s taken time but it’s also taken a lot of cost to come out of countries and businesses that we just didn’t want to be in.
“We are now operating in 12 countries as opposed to what was 38, so very focused on the UK.”
For the first time, RBS published the average pay gap between men and women in the bank, which it said was at 37.2%.
“Our gender pay gap reflects an under-representation of women at senior levels,” the bank said in its annual report. “That is not a satisfactory position and we know that we still have much to do to narrow the gap.”
When will the taxpayer recoup its RBS investment?
Analysis: BBC economics editor Kamal Ahmed
After nine years when accumulated losses totalled £58bn pounds – today a symbolic profit for RBS.
Does it mean the government can start planning more confidently about selling the 71% stake it holds on behalf of the taxpayer?
The fact the share price went down this morning by nearly 5% suggests not.
Investors are still nervous about the multi-billion pound fine the bank is expecting from the US.
At 269p, the RBS share price is still a long way below the 502p a share the government would need to break even on the billions of pounds it spent bailing out the bank a decade ago.
It has already sold some of its stake at a loss – and will have to continue on that path for a long period yet, in the hope that eventually the share price will rise above that 502p and, overall, a profit can be made.
Ross McEwan told me it would take three to five years before the government would have a “much smaller” level of ownership.
Selling the taxpayers’ stake in RBS has proved a much tougher and longer process than anyone imagined a decade ago.
On Tuesday, after months of wrangling, MPs released a report by regulators into the mistreatment of small business customers by the bank.
Mr McEwan said the report “did make for really tough reading”.
“We did not get it right for customers at the time they needed us when their businesses were struggling,” he said.
“We just didn’t look after them well enough”.
The bank has now put in place a complaints process overseen by a former high court judge, Mr McEwan added.