RBS Makes £2bn Annual Loss On Further Charges

Shares (Berlin: DI6.BE - news) in Royal Bank of Scotland (LSE: RBS.L - news) (RBS) plunged 9% on Friday opening after it announced its eighth consecutive annual loss, blaming restructuring and past conduct costs.

The bank, which is still 73% owned by the taxpayer following its bailout at the height of the financial crisis, said losses for 2015 totalled £2bn - an improvement on the £3.5bn reported the previous year.

RBS confirmed it had booked £3.6bn in conduct charges - announced last month - including £2.1bn to cover legal action in the US relating to the sale of mortgage products.

There was also £600m more in provisions for the payment protection insurance mis-selling scandal.

Restructuring costs came in at almost £3bn.

Sky News reported on Thursday how chief executive Ross McEwan was to sacrifice personal pay awards again in the wake of the performance.

While his total pay for 2015 doubled to £3.78m in 2015 from £1.91m in 2014, he confirmed he would not take up a £1m "role-based" incentive and would give half the award to charity in the current financial year.

The bank's total bonus pool was slashed by 11% to £373m and it warned of possible further financial hits ahead.

"We continue to deal with a range of uncertainties," RBS said in its outlook, noting that "substantial incremental provisions" may be added to the group's balance sheet in 2016.

However, RBS said it was making progress in shoring up the bank's business - with almost £1bn of costs taken out - as it continues efforts to become a UK-focussed lender to consumers and businesses.

It (Other OTC: ITGL - news) reported a 10% rise in net mortgage lending, with £9.3bn of new loans.

Net (LSE: 0LN0.L - news) lending in the commercial bank totalled £1.4bn.

The share price decline was attributed by analysts to delays in its plans to return money to shareholders.

Commenting on the results, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) , Laith Khalaf, said: "RBS is the Jekyll and Hyde of the UK banking sector, and the moment it’s hard to see who is in control.

"On the one hand the bank is downsizing, de-risking and cost cutting, while at the same time conduct charges are playing havoc with overall profitability.

"There’s a really strong UK retail bank in RBS trying to get out, but its results are still dominated by the litigation and restructuring costs that stem from its former days at the vanguard of casino capitalism."