RBS set for more results pain

A busy week for corporate results will be dominated by Royal Bank of Scotland (RBS) as the part-nationalised lender prepares to unveil more big losses

Royal Bank of Scotland
Royal Bank of Scotland

A busy week for corporate results will be dominated by Royal Bank of Scotland (RBS) as the part-nationalised lender prepares to unveil more big losses.

The scale of the turnaround job that lies ahead for RBS will be laid bare on Thursday as the taxpayer-backed lender is set to plunge deeper into the red after a dismal 2013.

In contrast to the fortunes of fellow bailed-out player Lloyds Banking Group, annual results from RBS are likely to dash hopes of any imminent return to the private sector.

The group, which is just over 80% owned by the Government, is thought to be heading for an annual loss of close to £8bn for 2013 after it stunned the City last month by revealing a string of scandal-related financial charges worth more than £3bn.

A strategy review from chief executive Ross McEwan is expected to say that as many as 30,000 jobs are to go over the next few years as the bank refocuses on retail customers, small businesses and larger corporates.

It will make heavy cuts to the 11,000 jobs in its investment bank, including a retreat from its US and Asian markets businesses. The planned sale of its US retail bank Citizens will remove 18,500 jobs, while further reductions will come from its float of Williams & Glyn’s, which employs about 4,500 staff.

Mr McEwan will also have to address the issue of bonuses amid reports that RBS is planning to share out a pot of around £500m.

This would be a drop on the £607m haul for 2012, although a reduction is partly expected given the significant headcount reduction in its investment banking team.

RBS has sought to deflect flak over bonuses by scrapping 2013 payouts for its eight-strong executive committee in the wake of its recent shock provisions update, while Mr McEwan has already said he would not take a bonus for 2013 or 2014.

But any banker windfalls will court controversy given that it is still heavily loss-making and under investigation over allegations of unscrupulous treatment of small firms.

The group is facing a series of investigations after a shocking report from Government adviser Lawrence Tomlinson accused RBS of driving firms to collapse in order to profit from their property assets.

The bank has fuelled anger further over bonuses by recently confirming it was pushing ahead with plans to request shareholder permission to pay bonuses of up to double an employee’s salary for 2014 onwards – the maximum allowed under new EU rules to cap payouts.

It will no doubt also be pressed on whether it plans to follow the lead of rivals such as Barclays by introducing monthly allowance payments to sidestep the rules further and boost potential bonuses.

HSBC, which reports today, is also in the spotlight over this issue amid reports it is discussing the option of making quarterly share payments to its top staff to get around the cap. Full-year results for HSBC are expected to show pre-tax profits jumping by a fifth to US$24.7bn (£14.8bn).

Figures from RBS will make for far more painful reading after its latest round of provisions, including £1.9bn to cover mainly US action over mortgage-backed financial products, an extra £465m to payment protection insurance (PPI) compensation and another £500m for mis-selling of interest rate swaps to small businesses. This is thought to put it on course for £8bn of losses, as the bank was already facing bad debt write downs of up to £4.5bn in the creation of an internal “bad bank” to wind down toxic loans.

The losses come after a calamitous year for IT glitches at RBS, prompting Mr McEwan to admit it had failed to invest properly in systems for decades and pledge hundreds of millions of pounds in new investment.

Ladbrokes is expected to report a sharp decline in profits when it delivers annual results tomorrow amid concerns over the progress of its online offering.

The bookmaker warned last year that its digital profits would be a long way short of hopes and analysts fear its revamped site will not be ready to take advantage of the World Cup this summer. A post-close update last month said group operating profit, excluding high rollers and exceptional items, would be around the middle of analysts’ forecasts of £129.8m to £151m, implying a fall of around 32%.

The group added that its gaming machines would be upgraded in time for the World Cup in June and that it remained on track to deliver “key strategic priorities” in the first half of this year, driving digital performance in the second half and beyond.

However, Investec’s James Hollins said he remained sceptical about a turnaround in its online performance, assessing that the completed new platform would not be ready until the fourth quarter of this year.

But he said that while Ladbrokes was underperforming online, the current share valuation looked fair given the possibility of better digital results, and the prospects for a dividend payout.

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