THE capacity for Royal Bank of Scotland (RBS) to leave its biggest shareholders – the UK public – feeling distinctly uneasy is seemingly endless.
State-owned bank RBS served taxpayers with another dose of bad medicine when it revealed it had lost more than £2 billion in the first half of this year.
The latest bitter pill for shareholders was a whopping £1.3bn in extra provisions to deal with more misconduct and litigation, including another £450m to settle PPI (payment protection insurance) claims.
It was enough to send the stock into a tailspin, the share pricing closing down seven per cent – wiping around £1.6bn from its market worth.
And there is more turbulence ahead. The spectre of a hefty fine in the US thanks to the mis-selling of mortgage-backed securities, and the prospect of a costly and protracted court battle with shareholders over its 2008 UK rights issue, loom grimly on the horizon. And that’s without considering the effects of the Brexit vote, with boss Ross McEwan acknowledging that “lower interest rates for longer” will have a stifling effect on income.
RBS was at pains to highlight the progress it has made under its turnaround strategy, stating its success in offloading non-core assets and building up its capital position. But it is difficult to see light at the end of the tunnel.
RBS has already shed thousands of jobs since 2008, and more losses seem certain as Mr McEwan indicated its branch network will continue to shrink.
Moreover, with the share price more than £3 adrift of the government’s break-even price, it will be a long time yet before taxpayers get their money back.
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