Brexit puts £44bn worth of business per day at risk, RBS warns

Bank taking steps to avoid disruption but said Brexit could lead to higher costs if a restructure becomes necessary

RBS has warned that Brexit puts its ability to clear daily cross-border payments under threat, and warned that a hard Brexit could have a “significant impact” on the bank.

The lender said the total value of the 300,000 cross-border payments it makes per day is “typically in excess of €50bn (£44bn) in any one day”.

The bank is taking action to prevent any obstacles to those transactions, but said that “given the quantum of affected payments and lack of short-term contingency arrangements, in the event that such euro clearing capabilities were not in place in time for a hard Brexit or as required in the future, it could have a material impact on the group and its customers”.

RBS said the general uncertainty surrounding Brexit “could have a significant impact on the group's operations or legal entity structure”, including higher costs if the bank has to restructure.

The group added: “The longer term effects of Brexit on the group's operating environment are difficult to predict, and are subject to wider global macro-economic trends and events, but may significantly impact the group and its customers and counterparties who are themselves dependent on trading with the EU or personnel from the EU and may result in, or be exacerbated by, periodic financial volatility and slower economic growth, in the UK in particular, but also in Republic of Ireland, Europe and potentially the global economy.”

The bank made its Brexit statements as it reported profit of £1.6bn, more than double the £752m profit made in 2017. Revenue was also up, rising by 2 per cent to £13.4bn.

The group hiked its dividend, and said it will return £1.6bn to shareholders, and £1bn to the government, which still holds a 62 per cent stake in RBS after bailing it out during the financial crisis.

Chief executive Ross McEwan said 2018 had been “a year of strong progress on our strategy”.

“We settled our remaining major legacy issues, paid our first dividend in ten years and delivered another full year bottom line profit,” he added.

“However, while our financial performance is more assured, we know that a significant gap remains to achieving our ambition to be the best bank for customers. We are fully focused on closing this gap.”

Analysts said RBS’s results showed it was doing everything possible to improve performance, but warned Brexit risks would hold the group back for the foreseeable future.

“Political and economic conditions leave sentiment towards the bank at a low ebb,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

“Restructuring costs and misconduct charges are disappearing in the rear-view mirror, while rising profits combined with a nice dividend will be applauded by shareholders. However in a weak economy, the top line isn’t growing.”

He added: “Brexit of course casts a shadow over a bank like RBS, which is deeply plugged into the UK economy, and therefore sensitive to any shocks which mean customers can’t pay back their loans. The volatile political situation is particularly keenly felt by the RBS share price because the Labour party has proposed breaking the bank up to create a number of local public banks.

“RBS has made great strides forward in recent years, but its transformation from an ugly duckling into a beautiful swan won’t be complete until economic conditions improve, and the government stake in the bank is eliminated.”

Earlier this week, a survey revealed that just one in 10 people agree with the government’s strategy for selling its stake in RBS. The research showed that one third of people would be in support of running the group as a nationalised bank rather than selling it to investors, while another third want the government to retain its holding for at least another year in hopes of selling it for a better price.

Following Friday’s results, Fran Boait, executive director at Positive Money, said: “Another dividend payout should cast even further doubt on the government’s plans to sell the public’s majority stake in RBS at a loss.

“It’s beyond clear that an RBS fire sale is not in the public interest. The government must rethink the selloff and consider how a publicly owned bank can best benefit the whole country.”

Shares in RBS were up 1.24 per cent in early trading.