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Ten years and it still hurts | Calamatta Cuschieri

After the latest financial results, the risk of further self-harm increases for the Royal Bank of Scotland, with revenue falling and competitive pressures rising

Calamatta Cuschieri
27 February 2017, 10:57am
RBS is still in an ongoing process, trying to clear the backlog of past crisis
RBS is still in an ongoing process, trying to clear the backlog of past crisis
Today, the Royal Bank of Scotland (RBS) is still owned by taxpayers and ruled by regulators. After the latest financial results, the risk of further self-harm increases with revenue falling and competitive pressures rising. RBS is still in an ongoing process, trying to clear the backlog of past crisis. The management team of the bank cannot do much but keep shrinking and hoping the bank will eventually recover from the nine-year run of losses. In fact, Friday results show the cost cutting (down 12%) and balance sheet shrinkage but still failing on other key aspects of the bank.

On the sideline, the US mortgage litigation is another hurdle; RBS must overcome and is largely outside the bank’s control. The litigation may be nearing resolution with the bank already setting $8 billion, to cover the cost of the case, although no one knows if this will be sufficient. The bank took another hit with the UK leaving the European Union, making the bank setting new targets for the post-Brexit era. When compared to other profit making British banks, like Lloyds and Barclays, RBS is still far away for the UK tax payer to break even.

Friday Roundup

On Friday, European markets were under the weather dropping most in the last five months losing momentum after hitting fourteen-month highs. The main factor being the Euro pushing back above $1.06 against the greenback, accelerating Europe’s losses, surrounded with the continued scepticism over the tax overhaul by US President Donald Trump. The focus was also on the upcoming presidential election in France. The Stoxx Europe 600 lost ground with no sectors moving higher. Basic materials, oil, gas and financial stocks led the decline. The continued profit taking is dragging the indices down from the recent highs. In the UK, the FTSE 100 veered towards a weekly loss with Royal Bank of Scotland and Standard Chartered dropping after their financial updates.

This week

A busy week of data ahead, both economic and corporate, should make life interesting, particularly as markets enter the week on the back foot. Economic highlights include PMIs from the UK, culminating on Friday with key services figures. In addition, we have the ISM, non-manufacturing and manufacturing, readings and US durable goods, with some hinting that the US having a steady and robust economic growth in February. Speculation on the possibility of a US rate hike as soon as March will be a potential market mover. The big event, however, will be the speech by President Trump to the Congress.

On the corporate front, we have full-year figures from housebuilders Persimmon and Taylor Wimpey, broadcaster ITV and advertising giant WPP, among many others. US earnings season is winding down, but UK earnings will keep investors occupied.

This article was issued by Roderick Duca, Trader at Calamatta Cuschieri. For more information visit, The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

Calamatta Cuschieri is one of Malta’s largest financial services firms. The company offe...
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