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March 29, 2023

RBS shares fall after biggest loss since financial crisis

Shares in Royal Bank of Scotland (RBS) have fallen sharply after the troubled company reported its biggest annual loss since being rescued by the UK government during the financial crisis. The bank’s pre-tax loss for 2013 was GBP 8.2 bn, compared with GBP 5.2bn in 2012. Its shares were down by more than 9 percent to around 320p. The average price paid by the government in 2008 was 500p. Ross McEwan, RBS’s newly appointed chief executive, told the BBC the results were “very sobering”. The fall in RBS’s share price has wiped almost GBP 2bn off its stock market value. “It’s another reminder that we’re six years on from the onset of this, and they’re still paying for it more than ever,” said Toby Morris, senior sales trader at CMC Markets. “We’re so far from being out of the other side of the tunnel with this stuff, it’s unbelievable.”
McEwan announced that RBS, once one of the world’s largest banking groups, would continue to shrink, by reducing its international and investment operations. The group, which includes NatWest and Ulster Bank, will concentrate instead on the retail market in the UK, and on getting the “basics of everyday banking right”. Its seven operating divisions will be transformed into just three customer businesses: personal, commercial and corporate. As part of this “back to basics” approach, the group will offer simpler retail products, cut the length of time it takes to set up a current account, and reward the loyalty of existing customers, rather than offering “sweeteners” to new joiners.
It will also increase lending to small businesses. Talking to the Today programme, McEwan said it would take three to five years for the bank to recover. “People – including the executives of the bank – didn’t realise how big a change process we had to go through to get this bank back into shape,” he said. “We’re in the least trusted industry and we’re one of those banks that aren’t trusted.”
In a letter to shareholders, RBS said “cleaning up a GBP 2.2 trillion balance sheet whilst addressing the many failings of the past” had taken its toll, but insisted that its new strategy would leave it in better health by 2016.
Despite the increased loss, RBS set aside GBP 576 M for staff bonuses in 2013, a drop of 15 percent on 2012. Of that sum, GBP 237 M went to investment bankers. McEwan defended the bonus pool, arguing that attracting the most talented staff was essential. The best employees, he warned, were constantly being “tapped on the shoulder” by other institutions.

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