RBS' CFO Sees a Return to Profit in 2018

TL;DR

RBS aims for profitability in 2018 amid cost cuts and restructuring.

Transcript

Manis cranny sat down with RBS CFO Yan Stevenson Manus started by asking him when the bank will turn a profit well look we've been actually quite open today that uh we think that we've got another uh tough year ahead of us for 2017 uh provided we can get through uh issues particularly us rnbs we think we'll be firmly back making profits in 2018 whi... Read More

Key Insights

• RBS anticipates a return to profitability in 2018, contingent on resolving issues like RMBS settlements and achieving cost efficiency.
• The bank plans to cut an additional £2 billion in costs over the next four years, focusing on improving inefficient back and middle office operations.
• Outsourcing is not a major part of the cost-cutting strategy; instead, RBS aims to streamline processes for better customer and cost outcomes.
• The Williams and Glyn proposal, if approved by the EU, is expected to enhance competition and customer outcomes, avoiding a complex M&A process.
• RBS's business lending remains robust with 10% growth in personal, business, and commercial banking, but signs of a slowdown are emerging.
• RBS's future dividend payments depend on resolving RMBS and Williams & Glyn issues, passing stress tests, and achieving profitability.
• RBS is nearing the end of its PPI provisioning, having taken a £200 million provision in Q4, indicating a conservative approach to potential liabilities.
• The bank's strategy involves working closely with the UK Treasury and European Commission to ensure compliance and favorable outcomes for stakeholders.

Questions & Answers

Q: When does RBS expect to return to profitability?

RBS expects to return to profitability in 2018. This projection is based on resolving key issues such as RMBS settlements and implementing effective cost-cutting measures. The CFO, Ewen Stevenson, has expressed confidence in achieving this target, emphasizing the importance of streamlining operations and improving efficiency across the bank.

Q: What are the main components of RBS's cost-cutting strategy?

RBS's cost-cutting strategy involves reducing £2 billion in expenses over the next four years. The focus is on improving inefficient back and middle office operations rather than outsourcing. By streamlining processes, the bank aims to deliver better outcomes for customers and achieve significant cost savings, ultimately enhancing its financial performance.

Q: What is the status of the Williams and Glyn proposal?

The Williams and Glyn proposal is currently under consideration by the European Commission. The proposal, made by the UK Treasury, seeks to improve competition in the banking sector and provide better outcomes for Williams and Glyn customers. RBS believes this solution is preferable to a complex M&A process and is awaiting EU approval.

Q: How is RBS's lending performance in the current market?

RBS's lending performance remains robust, with 10% growth in personal, business, and commercial banking sectors. Despite this strong growth, the bank is beginning to see signs of a slowdown, consistent with the broader UK economic trends. As the largest lender to the commercial sector in the UK, RBS continues to monitor market conditions closely.

Q: What factors affect RBS's ability to pay dividends?

RBS's ability to pay dividends depends on resolving several key issues: RMBS settlements, the Williams and Glyn proposal, passing stress tests, and achieving profitability. The bank is focused on addressing these challenges, with the CFO confident that profitability in 2018 will pave the way for resuming dividend payments, aligning with shareholder expectations.

Q: What is the current status of RBS's PPI provisioning?

RBS is nearing the end of its PPI provisioning, having taken an additional £200 million provision in Q4. This reflects a conservative approach to potential liabilities, as the bank awaits final guidance from the FCA. RBS aims to resolve outstanding PPI issues, reducing financial uncertainties and strengthening its balance sheet.

Q: How is RBS working with regulatory bodies on current issues?

RBS is actively collaborating with the UK Treasury and the European Commission to resolve current issues, including the Williams and Glyn proposal and RMBS settlements. By maintaining open communication and compliance with regulatory requirements, RBS aims to achieve favorable outcomes that support its strategic goals and enhance stakeholder trust.

Q: What are the implications of RBS's strategic plans for stakeholders?

RBS's strategic plans, including cost reductions, resolving key issues, and achieving profitability, have significant implications for stakeholders. By focusing on efficiency and compliance, the bank aims to enhance financial performance, improve customer outcomes, and restore shareholder confidence. Successful execution of these plans is expected to benefit all stakeholders, ensuring long-term sustainability.

Summary & Key Takeaways

• RBS CFO Ewen Stevenson discusses the bank's plan to return to profitability by 2018, focusing on cost reductions and resolving RMBS and Williams & Glyn issues. The bank aims to cut £2 billion in costs by improving inefficient processes, avoiding outsourcing, and enhancing customer outcomes.

• The Williams and Glyn proposal aims to improve competition and customer outcomes, pending EU approval. RBS's lending growth remains strong, but signs of a slowdown are visible. Future dividend payments are contingent on resolving key issues and achieving profitability.

• RBS is nearing the end of its PPI provisioning, with a £200 million provision in Q4. The bank is working with the UK Treasury and European Commission to ensure compliance and favorable outcomes, aiming for a sustainable financial future and stakeholder satisfaction.