The Royal Bank of Scotland Group plc RBS may not report a profit in fourth-quarter 2015. Chief Executive Officer of RBS, Ross McEwan mentioned, “We haven’t made money in seven years. By the looks of the third quarter we probably won’t in the fourth, but I’m not allowed to say that.”
The news was reported by Bloomberg, quoting McEwan during an Institute of Chartered Accountants in England and Wales event in London on Monday.
RBS, which was rescued from the onslaughts of the crisis with a £45 billion bailout by the British government in 2008, continues to face revenue pressure. Notably, 2014 marked the seven-straight year of annual losses. Regarding the last quarter performance, operating loss was £134 million ($207.7 million) as compared with profit of £1.1 billion ($1.8 billion) in the prior-year quarter. The loss resulted from high restructuring charges. Adjusted operating profit, excluding restructuring and litigation and conduct costs came in at £842 million ($1.3 billion), down 59% on a year-over-year basis.
Last week, RBS disclosed that it will recognize a loss of £265 million ($400 million) in its fourth-quarter 2015 results relating to its recent tender of certain US dollar, sterling and euro senior debt securities. The Edinburgh-based banking giant also mentioned that it expects to save around £455 million in interest expense over the life of the related debt securities.
Under the leadership of McEwan who took his position as CEO in October 2013, the UK-based lending giant is struggling hard to lift the performance. The state owned banking giant, has been striving for growth with several restructuring initiatives – cost reduction measures including job cuts and offloading assets, scaling back of global operations and increasing focus on consumer and commercial lending in the U.K. and Ireland, along with improving capital ratios.
In the latest stress tests carried out by the Bank of England, published on Tuesday, though RBS failed to meet its individual capital guidance, the bank is not required to submit a revised capital plan because of the measures already taken by the bank since 2014 to boost the capital position.
While the stress test results seem like a positive development for RBS, we remain apprehensive as the company may not post a profitable fourth quarter.
Currently, RBS carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the foreign bank space include Banco Macro S.A. BMA, National Australia Bank Limited NABZY and BBVA Banco Francés S.A. BFR. All three banks sport a Zacks Rank #1 (Strong Buy).
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