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RBS to Be Renamed as NatWest Group, Reduce Size of Investment Bank — Update

By Sabela Ojea

 

--Royal Bank of Scotland plans to rename itself as NatWest Group

--The British lender will reduce its NatWest Markets investment-banking arm and book up to GBP1 billon in costs

--RBS reported a rise in pretax profit for the fourth quarter of 2019 but trimmed its medium-term returns target

 

Royal Bank of Scotland Group PLC said Friday that it intends to rename itself as NatWest Group and reduce the size of its investment-banking business, as it reported an increased profit for the fourth quarter of 2019.

The majority-state-owned bank said too much of its potential value is locked in business lines and business models that are "too complex and generating too little return" and it will reduce the size of its NatWest Markets investment-banking business by around a half.

"This applies to parts of our NatWest Markets business, where we have shrunk over time but we could do more to increase its focus on our corporate and institutional customers and their needs," recently appointed Chief Executive Officer Alison Rose said.

NatWest Markets core income fell to 177 million pounds ($230 million) in 2019 from GBP1.08 billion a year earlier.

The British lender said that it expects between GBP800 million and GBP1.0 billion in strategic costs during 2020 resulting from a refocusing of NatWest Markets and cost cutting.

"We believe that as we refocus NatWest Markets, corporate and institutional customers in the medium to long term will represent around GBP60 billion of risk weighted asset equivalents and returns will improve to around 8%," Ms. Rose said.

The London-listed bank made a quarterly pretax profit of GBP1.55 billion compared with GBP572 million for the same period a year earlier.

Net profit came to GBP1.41 billion in the quarter from GBP286 million, it added, while net profit for the year reached GBP3.13 billion from GBP1.62 billion in 2018.

Pretax profit for the year rose to GBP4.23 billion from GBP3.36 billion pounds in the year-earlier period. Analysts had forecast a pretax profit of GBP4.07 billion, taken from FactSet and based on 15 analysts' estimates.

The London-listed lender booked a GBP900 million provision in the third quarter of the year to cover payment protection insurance costs following the late surge in claims ahead of the August deadline.

Total income for the quarter rose to GBP4.23 billion compared with GBP3.06 billion in the fourth quarter of 2018. Income for the year came to GBP14.25 billion from GBP13.40 billion, largely surpassing market forecasts of GBP12.14 billion, taken from FactSet and based on 16 analysts' estimates.

RBS said it is targeting an overall cost reduction of GBP250 million in 2020 after reducing its expenses by GBP310 million in 2019.

The bank added that it expects its return on tangible to equity to be in the range of 9%-11% in the medium to long term, having said in August it was unlikely to hit its targeted 12% RoTE in 2020.

The board has declared a final dividend of 3.0 pence, down from 3.5 pence a share, and a special dividend of 5.0 pence, down from a special dividend of 7.5 pence a share last year.

RBS's common equity Tier 1 capital ratio--a measure of a bank's financial strength--stood at 16.2% at Dec. 31.

Shares at 0802 GMT were down 8.20 pence, or 3.6%, at 220.50 pence.

 

Write to Sabela Ojea at sabela.ojea@wsj.com; @sabelaojeaguix

 

(END) Dow Jones Newswires

February 14, 2020 03:18 ET (08:18 GMT)

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