LONDON – Royal Bank of Scotland posted an operating loss for the third quarter as revenue declined and it reported increased costs for restructuring the bank bailed out by taxpayers during the 2008 financial crisis.
The bank said Friday its pre-tax operating loss, which excludes credit adjustments and other items, was 134 million pounds ($206 million), compared with a profit of 1.1 billion pounds in the same period a year earlier.
Total income fell 16 per cent to 3.05 billion pounds, primarily because of a drop in corporate and institutional banking. Restructuring costs rose to 847 million pounds from 167 million pounds.
“RBS continues to atone for past mistakes in a turnaround which is complicated, costly and protracted,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
RBS is struggling to put the excesses of the past behind it, including an ill-fated global expansion drive that briefly made it the world’s largest bank and led to its rescue by the British government at the beginning of the financial crisis. The government in August began selling its shares, reducing its take to just under 73 per cent.
Net income rose 6.3 per cent to 952 million pounds, boosted by a 1.1 billion pound accounting gain after RBS reduced its stake in Citizens Financial Group in the United States.
RBS announced Friday that the bank had sold its remaining 20.9 per cent stake in Citizens through a share sale that raised $2.6 billion.
The costs of resolving litigation and past conduct issues, primarily related to mortgage-backed securities, fell to 129 million pounds from 780 million pounds. RBS acknowledged that more was on the horizon, saying that future expenses “could be substantially greater” than those already reported.
CEO Ross McEwan said in a videotaped message that the bank was moving ahead in restoring its fortunes. Choosing to speak from the floor of a bicycle shop, McEwan tried to assure the public that RBS had small businesses close to home in mind.
“These results show that we’re making really good progress against the targets we’ve set ourselves and we are becoming a much stronger bank,” he said. “We’re a simpler bank and we’re a fairer bank — basically firmly positioned ourselves here in the U.K. and the Republic of Ireland, which is where we want our great franchises to perform.”