4th May 2016 13:12
LONDON (Alliance News) - Royal Bank of Scotland Group PLC's senior management on Wednesday said the bank has seen a slowdown in investment and retail sales in the UK and said its fortunes remain heavily influenced by a British market currently mired in uncertainty ahead of the Brexit referendum.
RBS Chairman Howard Davies, in a speech to be given at the company's annual general meeting, reiterated significant challenges remain ahead for the group.
On Friday, RBS posted a widened net loss for the first quarter of 2016, driven by a fee paid to the UK government which will eventually allow the lender to start returning capital to shareholders. Any returns, however, looks further away after RBS had warned Thursday there is a significant risk it will miss the deadline to sell its Williams & Glyn retail banking network in the UK.
Davies noted those challenges in his speech but also noted the group, following the disposal of non-core assets and after a substantial restructuring, will generate around 90% of its income from clients in the UK.
Recently, however, Davies said the bank has seen "signs of a slowdown in investment and in retail sales", and while overall growth has continued, this is likely to prove slower than previously anticipated.
Davies also noted the EU referendum in the UK, to take place on June 23, is "generating additional uncertainty".
"We are not one of those financial institutions whose core business depends critically on unfettered access to the EU markets, though our Irish and Western European businesses are significant," Davies said.
"But if a vote to leave the EU leads to a slowdown in growth, as the Treasury, Bank of England and most other economic forecasters suggest, that would be an unwelcome headwind for" RBS, he added.
Davies also noted conditions are currently difficult for all banks and said that when official interest rates are as low as they currently are, net interest margins "tend to contract". He added investors have been influenced by a view that rates are likely to remain lower for longer within a generally softer market environment.
Shares in RBS were down 1.4% to 219.50 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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