RBS restructuring costs rise; warns on potential higher conduct charges

30th Oct 2015 07:46

(ShareCast News) - Higher restructuring costs have seen third quarter pre-tax profits at RBS slump to £2m from £1.1bn in the same period last year.Restructuring costs rose to £847m from £167m in the period. Attributable profit was up to £952m from £896m as the company included a £1.1bn gain from its sale of US Citizens Bank.RBS, 73%-owned by the UK taxpayer, also warned that future costs relating to misconduct in the past could be bigger than anticipated. Operating losses were £134m compared with a profit of £1.1bn in the third quarter of 2014.Pre-tax profits for the nine months to September 30 fell to £295m from £3.2bn in 2014.Third quarter revenues fell by £596m to £3.04bn, mainly driven by a £394m decline in corporate and institutional banking."Income pressures were also seen in UK personal and business banking and commercial banking where good loan volume growth was offset by continued competitive pressure on asset margins," RBS said.Personal and commercial banking grew by 4.6% in the third quarter, it added.The bank's Tier 1 common equity ratio, used to measure its strength against financial shocks, rose to 12.7% in the third quarter, up from 12.3% in the three months to 30 June."Our estimate of overall restructuring and disposal losses guidance for 2015 to 2019 remains unchanged. In the fourth quarter of 2015, we expect restructuring costs to remain high as we continue to implement our core bank transformation and disposal losses to be elevated within the overall guidance on disposal losses, although the timing and quantum of these losses are subject to market conditions," the company said."Whilst legacy issues continue to be addressed, material further and incremental costs and provisions in respect of conduct and litigation related matters are expected, and could be substantially greater than the aggregate provisions RBS has recognised. The timing and quantum of any future costs, provisions and settlements, however, remain uncertain."Looking forward, the company said the credit environment was expected to remain "relatively benign, with modest underlying impairment charges"."Competitive pressure on asset margins is likely to continue, with limited opportunities for offsetting deposit repricing. In addition, non-interest income from fee-related products remains subdued due to modest volume growth, and specific regulatory impacts such as the change in interchange fees in the cards business. "