The Royal Bank of Scotland has scrapped its plans to launch Williams & Glyn as a standalone bank, after the group reported a £2bn loss for the six months of the year.
According to the bank’s latest results, the group has been hit with a £2bn loss, compared to a £179m fall in the same period last year.
RBS blamed the loss on legacy issues, after it spent £630m restructuring the business in the first half of the year, of which £345 million related to Williams & Glyn.
It also stated £1.3bn went out to pay for litigation and conduct costs, which include provisions for payment protection insurance and the shareholder rights issue.
The bank set aside a further £450m provision for PPI in the first half of 2016, taking the total cost to the bank up to £4.7bn. RBS also set aside a further £900m for extra costs it expects to pay for various legacy issues.
It made an adjusted operating profit of £1.5bn, although that was down on the £2.8bn made in the same period last year.
The bank, which is 73 per cent-owned by UK taxpayers, ditched its plans to spin-off its Williams & Glyn business, which it considered floating on the stock exchange.
RBS had spent about £1.4bn overhauling the IT systems for Williams & Glyn, and claimed the spin-off would help the bank pay dividends.
However, said the board decided the “risks and costs”, as well as the “complexities” of the separation, meant it would not be prudent to continue with the programme.
The banking giant said it was exploring alternative means to separate the banks and had “positive discussions” with a number of interested parties.
“These discussions are at a preliminary stage and may or may not lead to a viable transaction.”
The group also said it was confident it was making progress in its efforts to build a “simple and fair” bank for customers and shareholders.
Laith Khalaf, senior analyst at Hargreaves Lansdown, noted RBS has been pushed deep into the red by the costs of former misconduct. “The bank is also bracing itself for the huge costs stemming from a swathe of US litigation for mis-selling mortgage-backed securities in the run up to the financial crisis.”
He also noted RBS appears to now be more focused on finding a buyer for the challenger bank Williams & Glyn. “If they can find a willing counterparty, this could remove a major distraction for RBS, which will let it concentrate on restructuring and simplifying its business.”
katherine.denham@ft.com
