Royal Bank of Scotland chief executive Ross McEwan has said there is "a lot more work to do" in restoring the bank's Scottish trust rating, as he reported a £446million first-quarter loss weighed down by yet more misconduct costs.
The bank's trust rating among customers is a positive 44 per cent for NatWest across the Border, but only 10 per cent for RBS in Scotland, though the figure has jumped from 2 per cent in the final quarter of 2014.
Mr McEwan said it would take "another five years" to restore complete trust, "mainly to do with reputation and how people are feeling about the brand and the business".
He also warned: "There are still many conduct and litigation hurdles looming on the horizon, putting these issues behind us is a vital part of our plan.....We want to make sure that what we are doing today doesn't create new conduct issues."
He added: "This is going to be another tough year as we restructure the bank."
Mr McEwan was commenting on first quarter results showing misconduct and litigation costs of £853million and restructuring programmes costing £453m overshadowed an operating profit of £325m, which was better than the previous quarter's £375m loss but a quarter of the £1.28bn profit a year earlier.
However the underlying operating surplus was £1.63bn, up 16 per cent on the first quarter of 2014.
Mr McEwan said: "We are pleased with results at operating level but.....will only be completely satisfied when we see our profits showing in our bottom line."
On the dividend, he added: "I'm looking forward to the day when we can focus entirely on the future rather than deal with any legacy issues...(the bank is) determined to reward its shareholders for the years and years of support."
Mr McEwan said the increase in capital ratio to 11.5 per cent made RBS "one of the most strongly capitalised banks in the UK".
He also said lending to the smallest businesses had shown "encouraging signs" of growth.
The bank reported that it had benefited from generally benign credit conditions, with a £91m net release of impairment provisions, and from continuing reductions in operating costs. The UK franchises had seen volume growth, with increased operating profits in both personal and business banking and commercial and private banking compared with the previous quarter. It said the "exit bank" was making progress, with the wind-down of legacy activities.
Corporate and institutional banking (CIB) however lost £741m after £500m of litigation and conduct costs, up from £643m the previous quarter. Its return on equity dropped from a negative 13.8 per cent to minus 17 per cent, compared with the 15 per cent return from personal and business banking (PBB) where the adjusted operating profit was £732m, against £50m for CIB (following a £173m loss). CIB still employs 3500 staff, a fall of 200, while PBB has over 24,000.
Mr McEwan said the bank had in 2014 completed the first recovery phase of getting capital up and costs down and was now into phase two, the transformation of the core business. He hoped in 2015 to "get through as much of conduct and litigation charges as timescales and court dates allow".
But finance director Ewan Sutherland said restructuring costs would remain "elevated", as the bank drove forward four programmes including transforming the core bank, winding down CIB, and preparing Williams & Glyns for flotation after summer 2016.
More than half the latest bill for legacy costs came from asset writedowns in the US, but there was a further £100m for PPI mis-selling and other provisions for "investment remediation and an increase in complaints around our packaged accounts", Mr Sutherland said.
He was also confident that the bank's stake in Citizens in the US would reduce from the current 41 per cent to the 35 per cent which would see its results no longer consolidated in the accounts.
The bank has said it "remains committed to delivering an £800m cost reduction in 2015, notwithstanding the increase in the UK bank levy".
It said RBS had become the first UK-based bank to enable customers to log in to their mobile banking app using only their fingerprint, recording over 22m log-ins since launch.
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