Is RBS Ready to Go It Alone?
The Royal Bank of Scotland Group (NYSE:RBS) may be getting close to a healthy point where it can start paying dividends to investors and have the government divest, according to chief executive Stephen Hester.
The bank reported its earnings Thursday morning and showed significant progress in its recovery plan. It has been busy restructuring over the past four years and wants to finish doing most of that this year.
Part of the recovery plan has been honing the business down and working with safer investments, which the bank said it has made good progress at doing. Funded and risk-weighted assets were both down for the year, with the former dropping 107 billion pounds to 870 billion pounds and the latter 48 billion to 460 billion pounds. Of the risk-weighted asset reductions, nearly half occurred in the fourth quarter.
RBS has managed to reorganize in a way that its loan book is now funded entirely by customer deposits. It brought the Core Tier 1 ratio up by 0.6 percent from the previous year to 10.3 percent, and it has pushed short-term wholesale funding down to 42 billion pounds — less than half of what it was the year before.
Despite widening its group operating profit by almost 200 percent to 3.46 billion pounds, the bank posted a pre-tax loss for the year of 5.165 billion pounds that could largely be attributed to a 5.167 billion pound accounting charge.
Hester believes the bank may be close to being in a position to go into private hands, and now it will all depend on the government deciding whether or not it’s ready and how it wants to proceed.