RBS Snaps Losing Streak, But U.S. Settlement Looms -- Earnings Review

   By Adam Clark 
 

Royal Bank of Scotland Group PLC (RBS.LN) released its fourth-quarter and 2017 results on Friday at 0700 GMT. Here's what we watched:

PROFIT: RBS posted a fourth-quarter operating loss of 583 million pounds ($811.5 million) compared with a GBP4.06 billion loss in the same period in 2016.

This left RBS with a 2017 operating profit of GBP2.24 billion, swinging from a GBP4.08 billion loss the prior year. On a net basis, RBS made a GBP752 million profit compared with a GBP6.96 billion loss in 2016.

REVENUE: RBS's total income for the fourth-quarter was GBP3.06 billion, and GBP13.13 billon for 2017 as a whole.

Analysts expected fourth-quarter income of GBP2.92 billion, according to a FactSet consensus of four estimates. Total income for 2017 was projected at GBP12.96 billion by a FactSet poll of 17 analysts.

U.S. SETTLEMENT AHEAD: RBS posted its first profit in 10 years, largely because it reduced the money paid for conduct and litigation charges. However, RBS didn't set aside any more money for a settlement with the U.S. Department of Justice over alleged historic misselling of mortgage-backed securities. The looming final settlement continues to block RBS from making distributions to shareholders.

RESTRUCTURING COSTS: RBS said accelerated restructuring means it intends to increase investment and innovation spending. The bank said it expects to incur cumulative restructuring charges of about GBP2.5 billion across 2018 and 2019, up from previous guidance of about GBP1.0 billion. RBS also said the pace at which it is cutting operating costs will be "materially lower" in 2018, after adjusted operating expenses fell by GBP810 million in 2017.

CAPITAL STRENGTH: RBS's Common Equity Tier 1 ratio--a key measure of financial resilience--climbed to 15.9% at the end of 2017, from 13.4% at the end of 2016, as the bank continued to cut risk-weighted assets. RBS said it will look to keep its CET1 ratio ahead of its 13% target, with an eye to absorbing costs such as the U.S. settlement, future pension contributions and regulatory requirements.

Write to Adam Clark at [e-mail]; @AdamDowJones

(END) Dow Jones Newswires

February 23, 2018 05:36 ET (10:36 GMT)

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