U.K. lender Royal Bank of Scotland (RBS) reported 2013 profit that failed to meet market expectations on Thursday, as the company continued to detail its restructuring plans, including the divestment of assets.
Analysts were expecting a pre-tax loss for 2013 of £8 billion ($13.3 billion), but the figure came in lower at a loss of £8.24 billion. Last year, RBS posted a pre-tax loss of £5.16 billion.
RBS also announced a new strategic direction with the aim of building a bank that earns its customers' trust. The bank had to be bailed out during the financial crash of 2008 and has tried to move away from the reputation it gained under controversial CEO Fred Goodwin during this period.
RBS said it would focus on the U.K. and structure itself around the needs of its customers, with seven existing operating divisions realigned into three businesses: Personal & Business Banking, Commercial & Private Banking and Corporate & Institutional Banking. It said it would lift its proportion of U.K. assets to 80 percent from 60 percent. It also detailed its plans to sell Citizens, its U.S. retail and commercial bank, which is expected to be fully divested by the end of 2016.
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"With the announcement of our strategic review, we expect elevated restructuring costs in the next two years to get the bank's customer service and costs back to best in class levels in all respects," the bank said in Thursday's earnings release.
The bank - 81 percent owned by the government - signaled last week that a major overhaul was on the horizon. New chief executive Ross McEwan, speaking on a video posted on RBS's website said his aspiration was not to run the world's biggest bank, but the world's best bank. Analysts had expected this could include heavy cuts to the 11,000 jobs at its investment bank and a retreat from its U.S. and Asian markets businesses. McEwan said in a conference call on Thursday morning that it is "nowhere near" being able to put a number of any likely job cuts, according to Reuters.
Its core tier one capital ratio – a crucial measure of financial strength – stood at 8.6 percent at the end of 2013. The same ratio fell to between 8.1 and 8.4 percent at the end of last year, prompting Moody's to warn that it could downgrade the bank's credit rating.
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It also added that it was targeting a cost-to-income ratio of 55 percent by 2017 and 50 percent by 2020. The bank's current ratio currently stands at 73 percent.
Staff bonuses have been a hot topic in the U.K. Fellow lender Barclays announced 12,000 job cuts with its full-year earnings in February and a slump in profits. However, it also revealed that the bank's bonus pool jumped 10 percent.