LONDON – Investors punished the Royal Bank of Scotland on Friday for pushing dividend payments into the future as the cost of past conduct issues led it to its eighth consecutive annual loss. Shares in the taxpayer-owned bank plunged 8 per cent.
The sell-off came as the bank reported a fourth quarter net loss of 2.74 billion pounds ($3.8 billion), down from 5.79 billion pounds from the same period a year earlier, as it set aside another 2.1 billion pounds for past misconduct.
The loss was driven by costs relating to litigation over mortgage-backed securities and provisions for selling payment protection insurance to people who didn’t need it.
CEO Ross McEwan says the bank is “working through as many of the remaining conduct and restructuring issues as we can.”
“This is a tough but important part of our plan and we are determined to get through it as quickly as possible,” he said.
For the year, losses narrowed to 1.98 billion pounds from 3.47 billion pounds for 2014.
Once the world’s largest bank, RBS was bailed out during the 2008 financial crisis and has been posting annual losses ever since.
Treasury chief George Osborne suspended sale of the government stake in Lloyds Banking Group due to market turmoil. Analysts do not expect any resumption in the sale of government stakes of RBS or Lloyds soon.
Taxpayers own around 9 per cent of Lloyds and around 73 per cent of RBS.
Laith Khalaf, a senior analyst at Hargreaves Landsown, said the bank had “kicked the prospect of a dividend firmly into the long grass.”
“Markets had expected a 2016 payment, but RBS now says this won’t happen before it gets itself clear of the worst of the conduct charges for mis-selling mortgage securities in the U.S.; 2017 is now the earliest shareholders can expect a dividend,” he said.
The bank also included a note warning investors of the risks associated with a June 23 referendum on whether Britain should remain in the European Union. It said uncertainty about the outcome would lead to market volatility.
“In the event of a result supporting the U.K.’s exit from the European Union, the lack of precedent means that it is unclear how the U.K.’s access to the EU Single Market and the wider trading, legal and regulatory environment would be impacted,” RBS said.
It added that a vote supporting the U.K. exit from the EU may renew calls for Scottish independence from the country.