27th Feb 2014 09:12
LONDON (Alliance News) - Royal Bank of Scotland Group PLC Thursday reported its sixth consecutive annual pretax loss, and its biggest since 2008, while unveiling a business restructuring that further scales down its investment bank and narrows the bailed-out bank's focus to the UK.
RBS reported a GBP8.24 billion pretax loss for 2013, widened from GBP5.28 billion in 2012, after incurring GBP3.84 billion in provisions and GBP4.82 billion in impairments and other losses.
In response, RBS shares plummeted by 6.4% to 331.39 pence in early trading Thursday.
Chief Executive Ross McEwan, who has endured a tumultuous first few months on the job - including the creation of an internal bad bank to manage down toxic assets and the management of a large number of legacy issues still haunting the bank - unveiled a business restructuring that sees the lender's investment bank swallowed up as part of a shuffle that sees its seven operating divisions realigned into three businesses.
RBS's investment bank, which has seen significant shrinking of its balance sheet and reduced risk levels, no longer be visible. RBS has instead created three divisions. These are Corporate & Institutional Banking, Personal & Business Banking, and Commercial & Private Banking.
RBS said the reorganised bank will be a UK-focused retail and corporate bank with a presence internationally in order to drive its corporate bank. The reorganised bank will be managed as one, with one strategy.
Les Matheson will be chief executive of Personal & Business Banking, with Alison Rose to be chief executive of Commercial & Private Banking. Donald Workman will be chief executive of Corporate & Institutional Banking.
More detailed reviews of component business lines continue within each business, and further updates will be provided over the course of the year, RBS said. The costs to achieve its simplification strategic plan will be about GBP5 billion over 2014 to 2017, with about GBP1 billion of that already committed to its IPOs of Citizens, Williams and Glyn and the previous restructuring announced for the Markets business.
RBS said the its Capital Resolution Group, set up from January 1, will manage a pool of GBP29 billion in toxic assets. It had been forecast to manage GBP38 billion, but accelerated disposals and increased impairments reduced that total.
RBS said it expects "elevated restructuring costs in the next two years" as it gets its customer service and costs back to where it expects them to be. It expects cost reductions and improved efficiency as a result of its strategic review and expects the underlying cost base to be GBP1 billion lower in 2014.
Meanwhile, RBS said it raised GBP1.14 billion gross from the sale of its remaining significant stake in Direct Line Group PLC, selling the shares at 263 pence each to institutional investors.
Its said progress has been made on the IPO of Williams & Glyn, while the IPO of US bank Citizens remains on track.
RBS pays no dividend. It is negotiating with the UK government, which holds an 82% stake, for permission to resume dividend payments in the future.
"We are confident that the actions announced [Thursday] will deliver a customer-focused bank with undoubted capital strength, the potential for attractive returns and an ability to recommence dividends over the medium term," RBS said.
By Samuel Agini; [email protected]; @samuelagini
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