The Royal Bank of Scotland Group (RBS) has posted its latest earnings today, which saw a growing net loss in 2016 – the latest picture exacerbated what had already been a downtrodden H1, prompting the lender to embark on an ambitious cost-cutting strategy over the next four years that's estimated at nearly $2.5 billion.
The latest earnings release today underpins what many shareholders had feared – an inability to return to profitability after seeing the bank's revenues dive by nearly -20.0 percent in H1 2016. 2016 was also characterized by a sizable reduction in its workforce, with the early part of the year seeing 5 percent of its UK workforce cut.
Such strategies have already been adopted en masse across the banking industry, especially in the UK, where creeping labor costs, diving revenues, and the lingering specter of Brexit have pressured even the most resilient lenders.
For its part, RBS’ net losses swelled to $8.7 billion in 2016, compared to just $2.5 billion in the year prior – however, operating profits were higher, coming in at $4.6 billion, besting a street consensus of $3.9 billion, according to a Bloomberg report.
Capital Ratio Strategy
In terms of specifics, Chief Executive Officer Ross McEwan kept mum on the prospect of further job cuts, though he did stress the need for a cost-cutting strategy in the aftermath of the earnings report.
Instead, Mr. McEwan has opted for a leaner RBS, which involves consolidating the bank’s business across its domestic retail and commercial units. More specifically, he also demonstrated a willingness to continue pursuing his efforts to boost capital for RBS.
The firm’s core ter 1 capital ratio, a barometer of financial strength, retreated to 13.4 percent from 15 percent in September 2016. However, RBS unveiled plans to pursue a ratio of at least 13 percent at the end of this year, in conjunction with an agenda to trim 20 billion pounds of risk-weighted assets from its core businesses by the end of 2018 to boost capital.
