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Job Losses To Be Made At RBS After It Reports Its Ninth Straight Year Without Profits

Job Losses To Be Made At RBS After It Reports Its Ninth Straight Year Without Profits
In order to try to offset the challenge of making a profit in a low-interest rate economy, the Royal Bank of Scotland announced that it plans to cut another £750 million in operating expenses next year. To deal with U.S. legal action and the scrapped sale of its Williams & Glyn business, the bank also said it planned to store even more money.
These announcements followed a reporting of ninth consecutive year of losses in its full-year earnings by one of the U.K.'s "big four" banks. Its net loss for the year was reflective of around £10 billion of one-off payments including litigation and cost cutting charges and came in at £6.95 billion ($8.72 billion) - compared to a £1.98 billion loss in 2015. Compared with £2.9 billion in 2015, its restructuring costs were £2.1 billion for 2016, the bank said.
The bank forecast that it would swing back to full-year profits in 2018 but 2017 would be another year of losses.
As the bank targets £2 billion in savings over the next four years, there would be further job losses, CEO Ross McEwan said.
"There is a decent bank inside RBS struggling to get out, but it's those 'one-off items' which pop up with such alarming regularity which keep pushing the bank deep into the red," Laith Khalaf, senior analyst at Hargreaves  Lansdown, said in a note.
"The bank is certainly making progress, though it has been severely hampered by mopping up the mess left by the financial crisis. There is every reason to believe RBS can be a profitable bank, returned to private hands, the question is how long it will take to get there," he concluded.
The European Commission has been recently urged to compromise in its demands for RBS to have to sell off more than 300 of its branches by the U.K. government, which remains the majority shareholder of RBS after the lender was part-nationalized in 2008.
In order to prevent the lender from gaining an unfair advantage over its competitors, European regulators originally insisted the bank had to sell the branches by 2013.
In fact, in the £45.5 billion state bailout package during the financial crisis, the sale of part of RBS's assets had been a condition.
RBS has faced massive fines for its role in the mis-selling of residential mortgage-backed securities (RMBS) and was one of few U.K.-based banks to fail a stress test last November.
"I think there has been two significant issues overhanging the bank in recent months, one has been Williams & Glyn and the other has been U.S. RMBS, it's clearly a significant issue that we need to get through before we can get back to being a normalized bank paying dividends (and) making profits," Stevenson added.
"(It's) difficult to announce that sort of loss, particularly one of that magnitude," Ewen Stevenson, RBS chief financial officer said while reporting the loss.
It can be noted that since 2007, the U.K.-based lender not been unable to report an annual profit. Over the past decade, several legal scandals, job cuts and asset sales has embattled that bank.

Christopher J. Mitchell

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