Bring on the share sale, says RBS, as it makes £153m loss

RBS has announced a first-half post-tax loss of £153m, coming after £1.5bn of restructuring costs and £1.3bn of legal and compensation bills (AFP/Getty)

Royal Bank of Scotland will not restart dividend payments until 2017 at the earliest, but that should not stop the Government kicking off the first sale of shares this year, its chief executive has said.

Ross McEwan also warned that RBS, which is 78 per cent owned by the taxpayer after its £45bn bailout, would have “a very noisy year as we go further on restructuring and dealing with past conduct issues”.

His comments came as RBS announced a first-half post-tax loss of £153m, which came after £1.5bn of restructuring costs and £1.3bn of legal and compensation bills. Sir Philip Hampton, the outgoing chairman, added that banks had a record of underestimating the size of fines imposed by regulators. In May, RBS was among banks fined a total of £6bn over the rigging of foreign exchange markets.

However, RBS made a second-quarter attributable profit of £293m, up more than a quarter on the same period last year, driven by a strong rise in mortgage lending. This was better than the City had expected and the shares rose 10.8p to 342.4p.

That is still below the 502p paid by the taxpayer in the bailout, but the Chancellor has said the Government should start selling down its stake even if it begins at a loss.

Mr McEwan said: “I don’t like seeing losses and I’ll not rest until we can see real profits flowing through to the bottom line. The bank is in much better shape than it was even 12 months ago and it’s given the Government the confidence to say this is a bank that we can start selling off. I welcome the Government’s decision to start selling down its stake, which will be a significant day for the bank.”

He said the core of the bank’s business was performing well with underlying operating profits for the half-year up 2 per cent year-on-year at £3.45bn before restructuring and litigation costs. He added: “Yes, restructuring and conduct and litigation costs hit the headline numbers, but the quicker we work through them, the quicker we can return value to shareholders.”

Mr McEwan also warned that continuing US litigation and regulatory action on residential mortgage-backed securities could cost more than the £2.8bn, which the bank has already set aside. “We are not in negotiations with the authorities yet but hope to be within the next six to 12 months. The trouble is that we were 17th in a list of 17 banks and they have only got to Nomura, who were 16th.”

Earlier this week, RBS cut its stake in the US bank Citizens to around 21 per cent, selling $2.6bn (£1.7bn) of shares in the business. It said it would sell off the rest before the end of the year.

It also confirmed it was working towards spinning off its Williams & Glyn arm next summer with a share sale by the end of 2016, after resurrecting the brand to dispose of a chunk of its business to meet European rules on state aid.