RBS posts first profit in 10 years but its legacy issues still loom large

by | 23 Feb, 2018

 

The embattled British lender Royal Bank of Scotland today unveiled upbeat financial results for the first time in 10 years, reporting an annual profit of over £750 million compared with a £6.95 billion loss the year before – an outcome that the Chief Executive Ross McEwan said was “very symbolic”. Given the legacy of RBS, that’s definitely the right phrase to use.

At the height of the financial crisis a decade ago, the British government moved to prop up RBS to prevent a second major implosion in the banking sector after the demise of another key lender, Northern Rock. As the extent of the damage caused by the subprime mortgage crisis in the U.S.A became clear, policymakers in the Labour government of the day, headed by Gordon Brown, began to realise major safeguards would be needed to prevent a large-scale run on hemorrhaging British banks by nervous customers.

In October 2008, Brown announced the government would use of up to £50 billion of taxpayer’s money to take major stakes in high street banks, in order to restore confidence in the financial system and keep customers calm. It was an unpopular move which was met with criticism by taxpayers, who felt they were unfairly paying for the negligence of bankers who had been taking undue risks with investors cash in order to secure bigger payouts. This was a sentiment shared by the public in the U.S. after the signing of TARP (the Troubled Asset Relief Program) that same month.

It was amid these troubled times that RBS stood on the brink of total nationalisation.  In January 2009, the bank’s share price had fallen to 11.6p from £6.03 in March 2007, as it reported the worst losses in British corporate history. Speaking to Radio 4 today, Ross McEwan said: “RBS was the largest bank in the world 10 years ago, with a balance sheet of £2.2 trillion, and it spectacularly fell from grace.” A decade later however, the bank has seen a reversal of fortunes.

Today’s results, though optimistic, were bitter sweet, because RBS still faces a multi billion Pound fine from the U.S. Department of Justice due to its involvement in mis-selling toxic mortgage-backed securities during the crisis. Thus, despite the historic turnaround, shares fell today as the DoJ punishment loomed large. The news serves as a reminder that major banks are still paying the price for their shameful behaviour many years later.

RBS shares fall Friday as legacy issues remain in focus

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:

Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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