This week should be a landmark for Royal Bank of Scotland. The publication of its annual results on Friday should mark the first time since the financial crisis that the taxpayer-backed bank has reported a profit for shareholders.
RBS’s dire run started in 2008, when it racked up a loss of £24.1bn – the biggest in UK corporate history. The bank almost collapsed that year under the weight of more than £8bn of bad debts and £16bn of write-offs from its disastrous takeover of ABN Amro.
Another eight years of attributable losses followed as more bad debts, restructuring charges and regulatory fines took their toll. But 2018 looks like being the year the losses end.
The news isn’t as good as it looks. Most analysts, and the bank itself, were expecting a multibillion-dollar fine in the US before the end of 2017 but no settlement was reached. That penalty will have to be paid, and it could be big enough to send RBS back to a loss in 2018.
Oddly, most City brokers haven’t updated their forecasts so the average estimate is for a fine of about £2bn and a loss of £592m, even though the year ended with no fine.
RBS’s day-to-day business looks to be ticking along quite smoothly after Ross McEwan, the chief executive, spent four years taking it back to its UK commercial banking roots. But this success will be overshadowed by further questions about RBS’s global restructuring group (GRG), which is accused of driving small business customers to the wall between 2008 and 2013.
RBS has been involved in a long tussle with the Financial Conduct Authority (FCA) and MPs on the Treasury committee over publication of a report into the GRG. The FCA has released several partial versions, each more damning for RBS than the last. Leaked excerpts have shown staff in GRG were told to let businesses “hang themselves”. Now the full report has been leaked and the Treasury committee is considering publishing it next week – just in time for results day.
RBS will round off a week in which the big high street banks will report annual results. And it’s not the only one with problems that date back to the financial crisis, or before.
Barclays, which reports on Thursday, is under increasing pressure from the Serious Fraud Office (SFO) over the bank’s emergency fundraising in 2008. To avoid a government bailout, Barclays sold shares to Middle East investors to raise capital.
Last year, the SFO charged Barclays’s holding firm with providing unlawful financial assistance to Qatar by lending it $3bn to buy shares in the bank. On Monday, the SFO levelled the same charge at Barclays’s operating firm, which holds banking licences and regulatory approvals. Barclays’s UK high street business should be unaffected but, if banking licences were withdrawn from the rest of Barclays, its investment banking and global operations would be in deep trouble. It denies the charges.
Lloyds Banking Group, which unveils its results on Wednesday, is also in a long-running dispute with former business customers, including TV personality Noel Edmonds, over their treatment by HBOS before Lloyds rescued the bank in 2008.
HSBC is first up on Tuesday, when Stuart Gulliver will present his last set of annual figures as chief executive. He may be relieved after seven years in which HSBC was revealed to have laundered money for Mexican drug gangs, aided aggressive tax avoidance in Switzerland and threatened to move back to Hong Kong if the UK refused to be nicer to the banks.
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