The RBS Group, which includes RBS and NatWest, put aside £601 million in 2016 to cover mis-sold payment protection insurance (PPI), according to the banks’ financial results published today.
This is an increase on the £600 million put aside in 2015, although less than the £650 million provision for 2014.
It takes RBS’ total PPI provision to £4.9 billion, of which £3.7 billion - £3.3 billion (67%) in redress and £0.4 billion in administrative charges - had been paid by 31 December 2016.
However, the group warns that “additional future provisions and costs are possible” as the financial regulator has yet to conclude its consultation on implementing a deadline for PPI claims. This deadline is planned for June 2019.
‘Share price needs to double for taxpayer to break even’
RBS’ financial results for 2016 also reveal a £7 billion loss.
Ross McEwan, chief executive of RBS says: “In 2016 RBS made an attributable loss of ￡7 billion, mostly reflecting charges for outstanding litigation and conduct, and costs associated with restructuring of the bank. The financial impact of these issues is a difficult but necessary step in working through the bank’s legacy issues.”
Laith Khalaf, senior analyst at Hargreaves Lansdown adds: “RBS is still paying for the sins of the past, though the bank is now saying that 2017 is going to be its last year in purgatory, and that shareholders can look forward to a brighter, more profitable year in 2018.
“That may well be the case, there is a decent bank inside RBS struggling to get out, but it’s those “one-off items” which pop up with such alarming regularity which keep pushing the bank deep into the red.
“The botched Williams & Glyn separation has also been a costly embarrassment for RBS, which spent £700 million in 2016 to spin off the bank, on top of £750 million to fund the new plan, which totally dispenses with the need to hive off Williams & Glyn. Assuming the plan goes ahead, RBS faces further restructuring costs to re-integrate the bank it has been trying to separate from for such a long time.
“RBS is of course still three quarters owned by the government, and that will remain the case for the foreseeable future, seeing as the share price needs to double for the taxpayer to break even.”