RBS plans further job cuts as major cost cutting needed

13th Feb 2017 07:16

(ShareCast News) - Royal Bank of Scotland shares jumped on Monday morning on the back of weekend reports that it was axe around 15,000 jobs.While it has denied these claims, RBS is still expected to announce a significant new round of cost cutting alongside a ninth consecutive annual loss next week.The 73% taxpayer owned bank is forecast to be looking at a loss of around £2.3bn when it reports a week on Friday.The Sunday Times reported the lender will be "forced to slash up to 15,000 jobs" as it looks to cut costs, with further branch closures and yet more redundancies at its main offices in Edinburgh and London.This figure was based on an analyst's calculation that every £1bn of cost a UK bank removes equates to around 10,000 jobs.RBS, which has already closed about 200 branches in recent years, will announce plans to cut about £800m in costs, the Times then said on Monday.RBS needs to cut these costs as it has to drum up a fresh £2bn in capital to bring its equity ratio up to meet the Bank of England's requirements.A spokesman confirmed the bank will continue trimming costs, but said they "do not recognise" the quoted 15,000 job cuts number and declined to put a figure on expected job cuts.RBS shares initially spiked by as much as 1.2% to 231.5p and by just after 0900 GMT was trading around 0.8% higher for the day at 230.7p.Due to ultra-low interest rates and looming regulatory penalties, RBS does not have much option outside of cutting costs, said analyst Neil Wilson at ETX Capital."A fresh commitment to slash costs to the bone is what investors are looking for as we still have the prospect of a giant fine for mis-selling of residential mortgage backed securities in the US before the financial crisis."It's spectacularly failed to improve its return-on-equity or cut costs enough and the bank recently had to admit that it's not going to achieve its 2019 targets on those fronts. It's still better at cutting costs than growing revenues so seems to be sticking to what it's good at, although just how sustainable it is to continue slicing away is a doubt - the bank has already cut costs at a rate of roughly £1bn a year for the last three and shed around a third of posts since 2013.Even after management actions to redress capital shortfall it failed Bank of England stress tests, so this should go some way towards fixing this."