RBS plans to cut £2bn of costs

London - Royal Bank of Scotland (RBS) laid out a plan to cut costs by £2bn over the next four years as it posted its ninth straight annual loss.

The net loss widened to £6.96bn in 2016 from £1.98bn a year earlier, the Edinburgh-based lender said in a statement on Friday.

Excluding conduct charges and restructuring costs, operating profit was £3.67bn, topping the £3.1bn average estimate of seven analysts compiled by Bloomberg News.

Chief Executive Officer Ross McEwan remains mired in past scandals almost a decade after RBS required a £45.5bn bailout from UK taxpayers, as he battles to draw a line under surging charges tied to regulatory probes and the aborted sale of the bank’s Williams & Glyn consumer unit. RBS has now accumulated more than £58bn of losses since 2009.

“The bottom line loss we have reported today is, of course, disappointing,” McEwan said in an emailed statement. “These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis.”

It was a foregone conclusion that RBS would post its third-largest loss in the past decade, after it set aside £3.8bn in recent weeks for a US investigation into the sale of mortgage-backed securities, while pledging to pay to boost competitors in the UK commercial banking market to meet European Union demands tied to its bailout.

McEwan is pushing to eliminate operating expenses as he shrinks RBS, a one-time global titan, to a domestic retail and commercial lender. He’s redoubling his efforts after his plan to lower the bank’s cost-to-income ratio, a key measure of profitability, to below 50% by 2020 was blown off-course after the Bank of England cut interest rates last year.

The firm’s core Tier 1 capital ratio, a measure of financial strength, fell to 13.4% from 15% at the end of September. While McEwan has previously pledged to return capital to investors through dividends or share buybacks above 13%, he’s also said he needs to return the lender to profitability, pass stress tests from the Bank of England, close its US mortgage securities probes and reach a deal with the EU over Williams & Glyn.

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