RBS loses £8bn, markets shrug
In a statement yesterday, the bank said it expects to make an £8bn loss in financial year 2013. Markets didn't seem surprised.
Six years ago, if a bank had posted a trading update suggesting it was going to make a loss of several billion pounds, all hell would have broken loose. So it’s a testament to how used to crises the markets have become that when RBS issued a surprise statement saying it expects to make an £8bn loss in 2013, they barely raised an eyebrow. Shares closed at 332p, down from a high of 341p earlier in the day. In early trading this morning, they bounced back to 339p. No biggie…
Don’t get us wrong, things aren’t exactly smelling of roses at RBS: in the statement, published just after 4pm yesterday, the bank said it racked up £3.1bn in legal costs (which covers various fines, PPI compensation, etc) during the 2013 financial year. On top of that, the creation of its ‘bad bank’ cost it somewhere between £4bn and £4.5bn.
Presumably to quell investors’ nerves, chief exec Ross McEwan and eight of his senior executives announced that they wouldn’t be taking their bonuses this year. Alright, so he wasn’t in charge when most of this happened, but McEwan reckons ‘this is about leadership… this team is not responsible for past mistakes. But we are the leaders running the company now’. Very gallant.
Does that mean the end of the will-they-won’t-they debate over whether the bank will request 200% bonuses for its staff, as per EU directions? Unlikely, if we’re honest: the government and RBS still argue that it has to stay competitive. And, as MT has pointed out before, RBS staff are already among the worst-paid in the business.
(As an aside, it’s worth noting who is and who isn’t on the list. Among the sacrificial lambs are Citizens chief Bruce van Saun and Suneel Kamlani, co-chief of the bank’s markets division. But Kamlani’s partner in crime, Peter Nielsen, will take his bonus – apparently because he isn’t on RBS’ executive committee and therefore isn’t subject to McEwan’s attempt at saving face).
Perhaps the most significant part of all this is RBS’ core tier 1 capital ratio, which, because of all these losses and penalties, will drop to somewhere between 8.1% and 8.5%, down from 9.1% at the end of September. That’s still almost 50% off its target of 12% by the end of 2016.
To be fair, the changes were only supposed to be implemented last year – but the fact that RBS’ capital ratio has actually dropped since then is not at all encouraging. That privatisation is still some way off…