High street lender Royal Bank of Scotland’s (RBS) warning that it will report a loss in 2015 sends the shares crashing 4% to 250.3p.
Figures published by Investec after RBS’ unscheduled update point to the bank being £2.4 billion in the red during 2015 with one-off fines and charges the culprits. This reverses Investec’s previous £307.5 million pre-tax profit forecast for the year.
The £16.1 billion cap is being charged £1.5 billion by US regulators for allegedly mis-selling mortgage-backed securities in the country, while it has allocated a further £500 million to cover payment protection insurance (PPI) compensation demands.
The largest charge is £1.6 billion to help close the £5.6 billion deficit in its defined benefit pension scheme.
The part-nationalised bank has also taken an almost £500 million write-down in its private bank.
These charges could pour cold water on anticipation that RBS will reintroduce a dividend in 2016’s prelims after a nine year absence, although Investec retained its 5p a share estimate for 2016 in this morning’s note. For Shares’ view on whether the bank should pay a dividend or not, read Thursday’s edition (28 Jan), on sale tomorrow.
One positive is that RBS’ capital buffers are set reach 15% giving it one of the largest cushions against financial shocks in the sector.
Prelims will be posted in 26 February.