The bailed-out bank made the announcement as it reported it had made a profit in the first six months of the year. It is the first half-year profit for the bank – in which the taxpayer still owns a 71% stake – for three years.
The £939m of profits compares with a £2bn loss a year ago, although the bank’s chief executive, Ross McEwan, warned a full-year loss was likely.
The bank said its NatWest Markets arm – the rump of its investment banking business – was reviewing plans to “minimise disruption to the business and continue to serve its customers well in the event of any loss of EU passporting”. It is in advanced discussions with the Dutch national bank about setting up a small European headquarters in the Netherlands, where it already holds a banking licence – a legacy of its takeover of Dutch bank ABN Amro a decade ago.
The hub could employ 150 staff, RBS said, although it may not be necessary to move staff to Amsterdam as some could remain in London. The cost of setting up the operation will be in the “tens of millions”.
The legal warnings attached to results included information about an investigation by the Financial Conduct Authority into compliance with money laundering rules.
“On 21 July 2017, the FCA notified RBS that it is undertaking an investigation into RBS plc’s compliance with the money-laundering regulations 2007 in relation to certain customers. RBS is cooperating with the investigation,” the bank said.
McEwan would not elaborate. There was a separate disclosure – amid more than 16 pages of legal warnings – relating to a previously announced investigation into allegations that Britain’s banks processed vast amounts of tainted money from Russian criminals without noticing.
McEwan said the results demonstrated the investment case for the bank, which is important if the UK chancellor, Philip Hammond, is to be able to sell off any more shares.
“We’re doing what we said we would at our full-year results in February – growing income, reducing cost and improving returns for shareholders, while also starting to deliver a better service for customers,” said McEwan.
“We see the first six months of this year as proof of the investment case for this bank: our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced,” he added.
But a loss is likely by the end of the year as the bank is braced for a settlement with the Department of Justice in the US over the way it sold toxic mortgage bonds in the run-up to the crisis. Last month, the bank reached a deal with another US body, the Federal Housing Finance Agency, to pay $5.5bn (£4.2bn).
Another loss at the full year would mean the bank will have made 10 consecutive years of annual losses since its 2008 bailout.
The government has only managed to sell off a small part of its stake. In August 2015, a 5% stake was sold at a £1bn loss.
A number of issues have stood in the way of a sell-off, according to the chancellor, including the toxic bond scandal. However, another issue, the uncertainty about the sale of 300 branches as mandated by the EU at the time of its bailout, has now been resolved under a deal with Brussels over alternative ways to beef up competition for small businesses. In April, though, Hammond signalled that the shares could be sold at a loss saying “we have to live in the real world”.
RBS shares were up nearly 4% – the biggest risers in early trading, at 265.9p – still well below the average price per share of 502p during its bailout in 2008 and 2009.
The results were bolstered by a fall in costs as 14,200 staff – about 15% of the workforce which now stands at 75,000 – left the business. Unlike its rivals the bank did not take an extra provision for payment protection insurance mis-selling, while operating profits at NatWest Markets were 75% higher.
This article was written by Jill Treanor, for theguardian.com on Friday 4th August 2017 07.44 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010