RBS reports pre-tax loss of £8.2 billion for 2013

Thursday 27 February 2014 17.53
Full year losses at RBS amount to £8.2 billion for 2013
Full year losses at RBS amount to £8.2 billion for 2013

Royal Bank of Scotland slumped deeper into the red last year with pre-tax losses of £8.2 billion compared to losses of £5.3 billion in 2012.

The bank also revealed a staff bonus pot of £576m, including £237m for its investment bankers, down from a total pot of £679m in 2012.

RBS is just over 80% owned by the UK government and owns Ulster Bank here.

It saw losses widen significantly after taking a £3.8 billion provision for a string of scandal-related charges and a £4.8 billion hit for the creation of an internal "bad bank".

But chief executive Ross McEwan outlined a revival plan to make the bank "smaller, simpler and smarter" that will see it shrink from seven divisions to three and overhaul its service and products for retail customers.

The bank said it would cut more costs and refocus on its business in Britain. RBS - whose global ambitions precipitated its near collapse - aims to have 80% of its assets based in Britain, up from 60%, new chief executive Ross McEwan said.

The bank said it would shrink costs by £5.3 billion or 40%, over the medium-term as part of McEwan's plan to turn around the bank.

Shares in RBS closed 7.7% lower in London trade following the company's announcement.

"Let's be quite clear. We are too expensive, we are too bureacratic and we need to change," McEwan said.

It is selling operations, including its US retail business, Citizens, and cutting the number of business units at the bank from seven to three.

Mr McEwan warned there would be job losses because of plans to slash the number of divisions and make savings under a swingeing cost-cutting drive, which will see £1 billion of savings this year alone and £5 billion overall by 2017.

But he said it was too early to give details on the impact on its workforce.

Mr McEwan admitted the group was the "least trusted bank in the least trusted marketplace", but said the turnaround was designed to turn its reputation around.

RSB will cut teaser rates that lure in new customers and offer the same deals to both new and existing customers, while also rolling out a team of business banking representatives in branches on the high street as part of its overhaul.

The bank's hefty losses come after mammoth charges for scandals and litigation, including £900m in 2013 for payment protection insurance (PPI) mis-selling, bringing its total so far to £3.1 billion. It also set aside another £550m last year for mis-selling of interest rate swaps to small businesses, making a total of £1.25 billion.

But the group said that, excluding the £4.8 billion costs of creating an internal "bad bank" to hive off troubled assets, it made an operating profit of £2.5 billion last year, 15% lower than in 2012.

Philip Hampton, RBS's chairman, said in a letter to shareholders that the bank was monitoring the debate about Scottish independence.

"Clearly there are issues we are looking at - currency, the application of financial regulation, lender of last resort, credit ratings - which could affect us," Hampton said.

"But there is real uncertainty about how any of these matters would be settled in the event of a 'Yes' vote and the outcome would depend on negotiations between the two governments."