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RBS sets ú100 million aside to cover Brexit uncertainty

10/26/2018 | 05:49pm EST
A logo from a Royal Bank of Scotland branch is seen reflected in a window in the City of London

LONDON (Reuters) - Royal Bank of Scotland has set an extra 100 million pounds aside to account for possible bad loans as a result of Brexit uncertainty, in the first concrete sign this is clouding the outlook of a big British bank.

The provision means RBS is concerned that its customers might become less able to pay their debts when Britain leaves the European Union in five months' time.

While HSBC put aside $245 million (191.2 million pounds) at its half-year results to account for greater economic uncertainty, RBS is the first big UK bank to link the move to Brexit.

CEO Ross McEwan said RBS was taking into account the possibility of more negative outcomes from the Brexit negotiations, under new accounting standards that require banks to be better prepared for possible future losses.

"There's a lot more uncertainty in the marketplace until we get agreement, and that's what this is reflecting," McEwan told reporters on a call, referring to the provision.

McEwan said the move did not hint at any special problem with the RBS loan books, but reflected its low impairment levels following a decade-long clean-up after its 2008 state bailout.

RBS shares fell by 4 percent on Friday, the second worst performer in the STOXX European banks index <.SX7P> after Ireland's AIB Group.

The fortunes of major lenders like RBS are closely intertwined with the health of UK consumers and businesses.

The bank has been less upbeat about the consequences of Brexit than some of its peers, with McEwan warning recently that Britain could slip into recession if it crashes out of the EU with no deal.

Bank of England Deputy Governor Sam Woods said on Thursday banks in Britain must hold enough cash to withstand any disorderly Brexit hitting financial markets.

RBS's rival Lloyds said on Thursday it was confident that negotiations between London and Brussels could still deliver a withdrawal agreement, which remains elusive even after years of tense talks.

Both banks said that they had seen no sign borrowers' ability to service their loans had deteriorated so far.


McEwan said he had a phone call with Prime Minister Theresa May and executives last week and received an optimistic signal that a Brexit deal could be reached.

But with the March 2019 deadline fast approaching, businesses remain in the dark about how they will interact with EU markets and the impact Brexit will have on the UK economy.

The provision, announced with RBS's third quarter results, took the bank's impairments for the period to 240 million pounds, up from 143 million pounds in 2017.

The bank reported a profit of 448 million pounds for the quarter, below analysts' expectations of 507 million pounds.

RBS reported a common equity tier one capital ratio of 16.7 percent, well above its target of 13 percent, even after it paid its first dividend in a decade and a hefty fine to U.S. authorities earlier this year.

The bank took another 200 million pound provision for mis-sold payment protection insurance - Britain's costliest such scandal that has seen RBS alone pay out over 5 billion pounds.

It gave no clue as to its future dividend policy - information shareholders are hungry for after being starved of payouts for 10 years.

(Reporting by Emma Rumney and Lawrence White; editing by Silvia Aloisi, David Evans and Alexander Smith)

By Emma Rumney and Lawrence White

ę Reuters 2018
Stocks mentioned in the article
ChangeLast1st jan.
AIB GROUP PLC -2.00% 2.298 Real-time Quote.7.38%
ALPHABET INC. 3.37% 2667.02 Delayed Quote.-7.94%
EURO / BRITISH POUND (EUR/GBP) -0.05% 0.83199 Delayed Quote.-0.94%
HSBC HOLDINGS PLC -1.69% 529.2 Delayed Quote.17.75%
JUST GROUP PLC -2.99% 86.05 Delayed Quote.2.93%
LLOYDS BANKING GROUP PLC -1.65% 51.39 Delayed Quote.7.11%
NATWEST GROUP PLC -1.18% 242.9 Delayed Quote.7.44%
WILL GROUP, INC. 2.54% 1209 Delayed Quote.-15.81%
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Financials (USD)
Sales 2021 50 022 M - -
Net income 2021 12 281 M - -
Net Debt 2021 - - -
P/E ratio 2021 11,9x
Yield 2021 3,55%
Capitalization 144 B 144 B -
Capi. / Sales 2021 2,87x
Capi. / Sales 2022 2,71x
Nbr of Employees 223 448
Free-Float 98,2%
Duration : Period :
HSBC Holdings plc Technical Analysis Chart | HSBA | GB0005405286 | MarketScreener
Technical analysis trends HSBC HOLDINGS PLC
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Mean consensus OUTPERFORM
Number of Analysts 24
Last Close Price 7,08 $
Average target price 7,32 $
Spread / Average Target 3,35%
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Managers and Directors
Noel Paul Quinn Group Chief Executive Officer & Executive Director
Ewen James Stevenson Chief Financial Officer & Executive Director
Mark Edward Tucker Independent Non-Executive Director
Steven C. van Wyk Chief Information Officer
John M. Hinshaw Group Chief Operating Officer
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