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The Royal Bank of Scotland warned Friday that it was "very unlikely" to reach its long-term profitability targets after a difficult second quarter, characterized by stiff competition for mortgage loans.
The company announced a dividend payout of over £ 1.7 billion, partially funded by windfall gains from the sale of a Saudi bank in which it held a stake. The transaction meant that RBS's statutory earnings exceeded consensus expectations, but its underlying performance was worse than expected.
The price war on the mortgage market was a difficult first half for many UK lenders and prompted some smaller players, such as Tesco Bank, to withdraw completely from the market. RBS's warning follows a weak Barclays report released on Thursday, which also missed forecasts for its UK operations. At the same time, the shares of CYBG, owner of the Clydesdale Bank, fell by nearly 10% Tuesday, after saying that pressure on the mortgage market would affect its profit margins.
Loan receipts for the three-month period ending in June were 10% lower than the same period last year at £ 2 billion, about 100 million less than forecast. consensual.
Ross McEwan, outgoing Executive Director of RBS, said: "It's a set of solid results in tough market conditions. In an uncertain and competitive environment, we focus on areas that we can control. costs are down, capital and liquidity are strong and we continue to increase our lending to the real economy. "
Sign that RBS expects the persistence of the challenging environment, the bank said that it was unlikely that it would reach its 2020 target of increasing the return on tangible own funds 12% and reduce the cost / income ratio to less than 50%. The underlying ROTE was 7.5% in the first half of this year.
RBS shares fell 5% early in the session.
McEwan announced his resignation after five years at RBS's annual meeting in April. In early November, the 62-year-old New Zealander was appointed head of the National Australia Bank.
Business Manager Alison Rose is the preferred internal candidate to replace McEwan, but the bank has also spoken to third parties, including HSBC UK President Ian Stuart. The company did not provide any update on the search on Friday.
Despite the difficult market, RBS's statutory earnings were flattered by nearly £ 1 billion in gains from the merger of Alawwal and Saudi British Bank earlier in the year. First – half net income attributable to shareholders more than doubled from last year to £ 2 billion.
RBS led a consortium that acquired a 40% stake in Alawwal Bank as part of the unfortunate acquisition of ABN Amro before the financial crisis. RBS only owned about 15% of the bank, but had to hold capital corresponding to the entire consortium stake in its balance sheet.
The merger diluted RBS's stake and freed up capital by terminating the agreements with its consortium partners.
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