RBS ‘prepares’ for Brexit; targets £800m cuts

RBS chairman Howard Davies, left, said director Sandy Crombie, middle, helped induct him into Edinburgh community. CEO Ross McEwan, right, is targeting £800m cuts

The Royal Bank of Scotland chairman told the company’s annual general meeting that the EU referendum is “generating additional uncertainty” for the UK economy and that RBS is “preparing as best we can for various potential scenarios.”

“We are not one of those financial institutions whose core business depends critically on unfettered access to the EU markets, though our Irish and Western European businesses are significant,” said RBS chairman Howard Davies.

“But if a vote to leave the EU leads to a slowdown in growth, as the Treasury, Bank of England and most other economic forecasters suggest, that would be an unwelcome headwind for your company.

“So, as a prudent business we are preparing as best we can for various potential scenarios.

“However, our primary responsibility is to serve and support our customers, which we will continue to do, whichever way the UK electorate ultimately votes.”

Davies said that after a lot of change in the RBS boardroom in recent years, “a period of stability has been helpful.”

“I pay particular tribute to Sandy Crombie, the senior independent director, who has helped me enormously in my induction to RBS, and indeed to the Edinburgh community.

“As a result, the chairmanship transition has proceeded smoothly.”

Crombie is the former chief executive of Edinburgh-based savings and investment giant Standard Life.

RBS chief executive Ross McEwan told the AGM that in an environment where interest rates look set to stay lower for longer and where the macroeconomic outlook remains uncertain, RBS needed to adapt.

“There are a number of issues that are not within our control, but one thing that definitely is within our control is our cost base,” said McEwan.

“This year we will take at least another £800 million out of the cost base.

“A cost to income ratio of 72%, as it was for 2015, is simply too high.

“My intention is to get the cost base properly aligned to the bank we are becoming, not the global bank we once were.”

On April 29, Royal Bank of Scotland reported an operating profit of £421 million for the first quarter of 2016 compared with £37 million in the same period of 2015.

However, it reported an attributable loss of £968 million when a final dividend of £1.19 billion paid to the UK government — which ends the government’s claims — was counted.

RBS is still 73% owned by the UK government following its £45.5 billion bail out during the 2008 financial crisis.

Read the full chairman and CEO statements to the RBS AGM here: http://otp.investis.com/clients/uk/rbs1/rns1/regulatory-story.aspx?cid=365&newsid=713540