RBS loss weighs on FTSE

Added 5th August 2016

Royal Bank of Scotland shares slipped 4.6% after the bank reported a worse than expected loss.

RBS loss weighs on FTSE

The fall in RBS shares weighed on the FTSE 100, with the index a marginal 0.3% up at 6762 despite the monetary stimulus measures announced by the Bank of England yesterday

The FTSE 250 did marginally better this morning climbing nearly 1% to 17,400.

The bank lost £2bn over the first six months of the year, which it blamed on ‘legacy issues’ related to things such as the PPI scandal and litigation stemming from the financial crisis of 2008.

A £1.19bn special dividend payment the bank was obliged to pay the government was also a major factor in booking the loss.

Chief executive Ross McEwen also revealed RBS is no longer on track to complete the mandatory disposal of Williams & Glyn to form a standalone bank by the end of 2017. He said this was due to the complexity of the separation process. 

The bank also confirmed it has put aside money to deal with the fallout relating to regulatory action and compensation claims involving its private banking arm Coutts & Co.

Despite what was a poor headline number, Hargreaves Lansdown senior analyst Laith Khalaf sees a silver lining to the cloud.   

“Things are not quite so bad if you look through one-off items,” he said. “The bank still made an adjusted operating profit of £1.16bn, though that is sharply down on the £2.89bn it made in the same period last year. The bank’s solvency is still strong, but declined from a CET 1 Ratio of 15.5% at the start of the year to 14.5% at 30th June 2016.”

“RBS looks to be taking a sharp turn in its plans to spin off Williams and Glyn, which now appear to be more focused on finding a buyer for the new challenger bank,” Khalaf added. If they can find a willing counterparty, this could remove a major distraction for RBS, which will let it concentrate on restructuring and simplifying its business.”

 

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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