×

RBS reports net loss of $8.7 billion for 2016, its ninth straight year without a profit


Royal Bank of Scotland (RBS), one of the U.K.'s "big four" banks, reported its ninth consecutive year of losses in its full-year earnings release on Friday.

Its net loss for the year came in at £6.95 billion ($8.72 billion) - compared to a £1.98 billion loss in 2015 - and was reflective of around £10 billion of one-off payments including litigation and cost cutting charges. It said restructuring costs were £2.1 billion for 2016, compared with £2.9 billion in 2015.

"(It's) difficult to announce that sort of loss, particularly one of that magnitude," Ewen Stevenson, RBS chief financial officer, told CNBC on Friday.

The U.K.-based lender, which required a state bailout during the financial crash, has now been unable to report an annual profit since 2007. The embattled bank has waded through several legal scandals, job cuts and asset sales over the past decade.

RBS announced Friday it plans to cut another £750 million in operating expenses next year in order to try to offset the challenge of making a profit in a low-interest rate economy. The bank also said it planned to store even more money to deal with U.S. legal action and the scrapped sale of its Williams & Glyn business.

It forecast that 2017 would be another year of losses but would swing back to full-year profits in 2018. CEO Ross McEwan said there would be further job losses at the bank as it targets £2 billion in savings over the next four years, according to Reuters.

Shares of the lender slipped over 2 percent shortly after markets opened in Europe on Friday morning.

"There is a decent bank inside RBS struggling to get out, but it's those 'one-off items' which pop up with such alarming regularity which keep pushing the bank deep into the red," Laith Khalaf, senior analyst at Hargreaves Lansdown, said in a note.

"The bank is certainly making progress, though it has been severely hampered by mopping up the mess left by the financial crisis. There is every reason to believe RBS can be a profitable bank, returned to private hands, the question is how long it will take to get there," he concluded.

Significant issues

The U.K. government, which remains the majority shareholder of RBS after the lender was part-nationalized in 2008, has recently urged the European Commission to compromise in its demands for RBS to have to sell off more than 300 of its branches.

European regulators originally insisted the bank had to sell the branches by 2013 so as to prevent the lender from gaining an unfair advantage over its competitors. In fact, the sale of part of RBS's assets had been a condition in the £45.5 billion state bailout package during the financial crisis.

The Commission is set to consider whether measures taken by RBS throughout its multi-year restructuring are equivalent to selling off its branches which would likely take many weeks to resolve, according to a Reuters report.

RBS, which was one of few U.K.-based banks to fail a stress test last November, has also faced massive fines for its role in the mis-selling of residential mortgage-backed securities (RMBS).

"I think there has been two significant issues overhanging the bank in recent months, one has been Williams & Glyn and the other has been U.S. RMBS, it's clearly a significant issue that we need to get through before we can get back to being a normalized bank paying dividends (and) making profits," Stevenson added.