Today we find ourselves arriving at what has become an annual event although sadly there is never any money for a party although we are invariably promised that there will be plenty of cash next year. This is of course the announcement of more bad figures from Royal Bank of Scotland as we look back over all the promises made on its behalf which stretch back now to the beginning of the credit crunch. Let us step back in time to the 13th of October 2008.and see what the then Chancellor Alistair Darling told us in the Guardian.
There is every reason to be confident that, as we go through this, the British taxpayer will get his money back.
The UK taxpayer invested at around £5 per share and this morning’s price is £2.44 so it looks as though Alistair will have to remain confident for quite some time and maybe forever. Also we learn that so-called alternative facts come from official sources as well as unofficial. But as time has passed others have proclaimed triumph only to see disaster.
Here is The International Financing Review from 2012.
In some ways, however, RBS is well ahead of the pack…….RBS was forced to concentrate on what it was good at and should come out of its current (second) restructuring as one of the more efficient banks in the industry.
I am not sure how much more they could have been wrong! But they were not alone as this from a former employer of mine Union Bank of Switzerland proves.
However, with 2013 expected to be the last year of significant restructuring for RBS, it is likely to be one of the first European banks to have dealt with legacy issues.
We can put that as a clear fail as the 2017 figures will show us later as we mull whether RBS will ever be able to sing along with Taylor Swift regarding legacy issues.
Baby, I’m just gonna shake, shake, shake, shake, shake
I shake it off, I shake it off
Along the way we have at least managed a little humour as this from Bluebullet on Twitter from 3 years ago shows.
Dear Dragons Den, I have 80% share. Losses this year are £8 billion. I am paying out £0.5 billion in bonuses. Would you like to invest?
Chief Executive Ross McEwan told us this only last year.
“I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank,” chief executive Ross McEwan said.
“We will now continue to move further and faster in 2016 to clean up the bank and improve our core businesses.”
Does he think so? Well according to this in the Guardian he does although you may spot the bit that makes him think so.
“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,” said the RBS chief executive, Ross McEwan, who was paid £3.5m for 2016.
Okay so what was the loss declared?
Royal Bank of Scotland has reported losses of £7bn for 2016, taking its losses since its 2008 government bailout to more than £58bn.
The taxpayer-backed bank has also admitted that it will not return to profit until 2018, indicating that it will report 10 years of losses before it returns to the black.
There are a litany of issues here as we note yet another large loss. For Mr McEwan there is an awkward trend to explain as losses have gone £1.5 billion then £2 billion and now £7 billion as he has promised improvements. For the UK taxpayer there is the issue that the losses since the bailout are now larger than the funds invested. Next there is the fact that things are apparently so bad even these serial fakers cannot claim a profit is just around the corner!
If we switch to the Financial Times we see two of my themes being deployed as a defensive mechanism. Firstly losses are always described as a one-off which are nine years and rising of them is risible and secondly the way a bit like inflation measure we keep getting them until the “correct answer” is given.
In total, these one-off conduct and restructuring costs amount to £10bn. This pushed down the bank’s capital reserves, with the common equity tier one ratio dropping to 13.4 per cent, from 15.5 per cent a year ago. On a pre-tax basis, RBS reported an operating loss of £4.1bn, compared to a £2.7bn loss a year earlier. Its core business, comprising commercial and retail banking, delivered its eighth successive quarter of £1bn operating profit, stripping out one-off items.
So it made a profit right?
I have been critical of other countries on such matters so it is now time to apply similar methodology to the UK and the botched efforts with Williams & Glyns should lead to sackings of those involved. From the Financial Times.
This includes the £750m cost for the new Williams & Glyn plan unveiled last week. RBS has spent some £1.8bn over a number of years on attempting to divest Williams & Glyn.
They have splashed the cash and then given up after buying time with our money in a saga rather like Novo Banco in Portugal.
There are also more problems on the horizon as of course RBS was involved in so much miss selling and the issues with small businesses seem to just grow and grow. As to optimism well there does not seem to be much on display here in this from the Financial Times.
Mr McEwan is targeting £750m of cost savings this year, as part of a total £2bn of planned cuts over the four-year period, which is expected to involve hundreds of job losses and branch closures.
Actually the banking environment is really rather favourable. For example the UK economy returned to solid economic growth nearly four years ago and the Bank of England regularly rustles up a new bank subsidy plan. The latest one called the Term Funding Scheme has now grown with little public attention to just under £42 billion. On that theme there was this from City AM yesterday.
Mortgage lending hit £18.9bn in January, new figures have shown – two per cent up on the same month last year, and the best January since 2008.
Enough to cheer both a banker’s and a central banker’s heart. Indeed the theme has been reinforced this morning by mortgage approvals rising to above 44,000 in January according to the British Bankers Association. The most similar bank to RBS is Lloyds Banking Group so how did it do this year?
Pre-tax profits increased by 158% to £4.24bn, a level last seen in 2006 before the financial crisis. ( BBC )
Next nearest is Barclays so what about it?
The bank reported a profit before tax of £3.2bn for 2016, up from £1.1bn the year before. ( BBC )
As you can see if they are from Venus RBS looks like it is from Mars. It needs a change and needs to go one way or another. What I mean by that is the taxpayer should fully own it and raise the current stake of around 72% to 100% or it should be sold-off and left to stand on its own. The current half-way house is doing no good at all. The fact that Lloyds is now nearly fully in the private sector ( ~96% of shares) is a guide but maybe not as much as we think as of course the shares were more easily sold off because it was already doing better than RBS.