Change of name
RBS doubles profit and demotes brand in favour of NatWest
The RBS name was removed from the bank’s London head office in 2017
Royal Bank of Scotland has doubled its bottom line profit and is to rename the parent company NatWest Group in a controversial move to demote its historic brand.
The bank also confirmed it would work towards ending its funding to coal, oil and gas companies that do not comply with commitments to meet carbon targets.
Chairman Howard Davies today said the change of name would bring the group into line with the largest part of its business, although analysts will say it is part of a move to distance the bank from the damage to the RBS brand during the financial crisis.
About 80% of group’s customers are now with NatWest and there is said to be no impact for those who will continue to be served through existing brands, nor will it influence the location of the head office.
The chairman said: “The board has decided that it is the right time to align the parent name with the brand under which the great majority of our business is delivered.
“Customers will see no change to products or services as a result of this change and will continue to be served through the brands they recognise today.”
A change of name has been discussed by the board for at least two years. RBS rescued what was then a battered NatWest brand almost 20 years ago.
Despite his reasons for changing the name in line with customer growth, in 2018 the chairman said the current name was weighing on attempts to revive its fortunes and may have to be ditched.
The bank today reported further progress. Attributable profit almost doubled (up 93%) to £3.1 billion from £1.6bn in 2018. Full year operating profit came in 26% higher at £4.2 billion. It also announced a dividend of 8p of which 3p is the proposed final dividend and 5p a special dividend.
Former CEO Fred Goodwin seen on Friday leaving the Balmoral Hotel in Edinburgh where he had been attending a charity lunch (pic: Terry Murden)
Conduct and litigation costs came in a £85m for Q4 but there were no new provisions for mis-sold payment protection insurance following the deadline for claims last August. However, there were Impairments of £696m against £398m at FY 2018 due to one-offs in commercial business.
The bank’s common equity tier 1 ratio – a measure of its capital reserves – will be 16.2%, post dividend.
The bank is targeting £250m in cost savings this year, but declined to reveal any impact on jobs.
New chief executive Alison Rose, announcing her maiden results, said she intends to cut down under-performing investment bank NatWest Markets.
The bank also pledged to “at least” halve the climate impact of its financing activity by 2030.
It will stop lending and underwriting to companies with more than 15% of activities related to coal, oil and gas unless they have credible transition plan in line with 2015 Paris Agreement by end of 2021. There will be a full phase-out from coal by 2030.
There will be a doubling of investment into renewable energy.
Our performance doesn’t yet match the potential that exists in this bank. We can deliver so much more.– Alison Rose
Ms Rose, said: “Today marks the start of a new era for our bank as we announce our new purpose – to champion potential, helping people, families and businesses to thrive.
“These results are a reminder of the strong foundations we have built. Our profits are up, our capital position remains strong and this year we will have returned a further £2.7bn to our shareholders.
“But our performance doesn’t yet match the potential that exists in this bank. We can deliver so much more.
Alison Rose: ‘I am hugely excited about the opportunities that lie ahead of us’ (pic: Terry Murden)
“The way people live their lives has changed. And their expectations of companies are changing too; looking for us to deliver not only financial performance but a positive contribution to society; benefitting customers and communities as well as shareholders. The future of this bank depends on us successfully delivering on both.
“I am hugely excited about the opportunities that lie ahead of us.”
Chief marketing officer, David Wheldon, will be retiring, leaving the bank at the end of March. An internal and external search for his successor will now begin.
Investors were unimpressed by the statement, with the shares falling in London by 6% in early trade.
Russ Mould, investment director at AJ Bell, said: “While the renaming of Royal Bank of Scotland to NatWest makes sense given the latter is the company’s biggest brand, it is clear the company is looking to escape the sins of the past with the change.
“It also represents events moving full circle given the much smaller RBS acquired NatWest at the start of this century, kicking off the aggressive expansion under disgraced former boss Fred Goodwin which eventually ended in disaster and a state bailout.
“From an investor perspective the main transgression in this set of results is a modest cut to the ordinary dividend, even if this is supplemented by a hefty special payout.
“That was not the only disappointment in the numbers; the company’s net interest margin – the key measure of bank’s profitability – remains under pressure amid a very competitive market and a low interest rate environment. The outlook statement is also far from cheery and its return on equity target has been downgraded.
“New CEO Alison Rose continues a restructuring effort pursued by her predecessors over the last decade, with a plan to strip out capital from the investment banking business.
“Although the PPI issue is in the rear view mirror and the company looks to have settled its historic legal issues in the US, it faces significant restructuring costs in 2020 and a hit from regulatory changes affecting its personal banking business.
“Ultimately, the fact the business is still heavily owned by the state and that interest rates remain on the floor look set to remain thorns in Rose’s side.”
Donald Brown, senior investment manager at Brewin Dolphin, said: “Since turning a corner last year, it has been steady as she goes for RBS – today’s results are a continuation of that story and shareholders will welcome the Valentine’s gift of a 5p special dividend.
“An increase in profits is good news for investors, but employees will be fearful of yet further job cuts in the investment banking division while re-branding the parent company to NatWest is clearly another way of making a break with the past.
“The net interest margin, however, remains under pressure and there is a distinctly cautious tone from management about the outlook for the year ahead. A very different bank to what it once was, RBS remains on the road to recovery but the government’s stake will likely continue to hang over the share price.”