RBS losses have reached £2 billion for the first half of this year. The Royal Bank of Scotland (RBS) has reported a first half loss of £2 billion ($2.63 billion.) The bank’s chief executive, Ross McEwan, identified “legacy issues” as being the reason for the loss. Last year’s loss was £179 million.
According to McEwan, he ‘sorted out’ a number of legacy issues over the past two years, including £1.3 billion on litigation and conduct costs. These will also have some effect on the 2017 results he stated. By “legacy issues” he was referring to costs associated with PPI (payment protection insurance) that had historically been mis-sold to customers, and also litigation in respect of a 2008 £12 billion rights issue.
A large proportion of RBS losses have been due to PPI repayments. Total costs of the PPI fiasco (which applied to practically all banks operating in the UK) approached £5 billion ($6.57 billion) of which £450 million were set aside in the first half of 2016 for future repayments. This issue dates back to PPI sold from 1993, and a proportion of all sums paid by bank customers for payment protection can be claimed back. Around £33 billion ($43 billion) has been set aside by UK banks to meet past and future claims.
This loss is the largest of 8 years continuous RBS losses. The bank was bailed out by the UK government with a rescue package back in October, 2008, when the government purchased shares in the bank to provide a degree of financial security during the global financial crises at the time. It is still 73% owned by the British taxpayers. The bank announced that restructuring costs will cost over £1 billion for 2016, of which £630 million has already been spent in the first half of the year.
The Royal Bank of Scotland owns the Williams & Glynn bank, on which it also spent £345 million in restructuring. RBS must divest this bank by the end of next year as part of the 2008 £45 billion bailout. Spanish banking group, Santander, has made a formal offer for its 300 branches, but not the IT platform which RBS has spent £1.2 billion on building.
Likely as a result of these RBS losses, shares in the bank fell 3.75% to 184.8p in early trading.
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