Page 20 - RBS GRG F Teaching Note

that it is in good financial health? It is 71%-owned by the U.K.

government.

A £752m profit for 2017 was the first annual profit in a

decade and followed a £7bn loss in 2016. These results did

not live up to City expectations and this combined with

investor’s concerns about the prospect of further DoJ fines

saw shares fall. Moreover, RBS has yet to make any dividend

returns to shareholders.

Sir Howard Davies, said it was “not the moment to declare a

final victory. We still have costly legacy issues to resolve.” He
added that uncertainty over Brexit was a challenge to the

bank’s European business. (5)

According to McEwan RBS has two challenges yet to face:

1. The DoJ

2. the large taxpayer stake, which has to be sold off at

some point.

Profitability was hit with the introduction of a new 8 percent

surcharge on bank profits in January 2016 at a time when

the bank had exited more than 26 countries as the

mandatory ring-fencing of its operations continued to

enable it focus on its core UK market.

It was also engaged in defending up to fifteen mortgage

lawsuits and investigations for the mis-selling of toxic

mortgage bonds in the run-up to the 2008 financial crisis.