Lloyds and RBS set for further losses

Royal Bank of Scotland and Lloyds Banking Group will reveal the impact of another year of scandal when they report further big losses.

Left reeling from Libor rigging revelations and an ever increasing bill for mis- selling claims, results from RBS and Lloyds are likely to confirm a lengthy road to recovery ahead.

Barclays has already set the scene with its results earlier this month detailing another £2.5bn (€2.9bn) to cover the costs of misselling in 2012, which came on top of its £290m settlement for Libor fixing.

Fresh from agreeing its own settlement for the Libor scandal, RBS is the first to report annual figures on Thursday.

It has already announced about £300m will be taken from its staff bonus pot and clawed back from previous awards to help pay for its £391m in Libor fines.

The remaining bonus haul is likely to be much less than the £785m paid out for 2011.

CEO Stephen Hester said last year he would waive his annual bonus following the bank’s IT meltdown, but he is in line for around £780,000 in shares next month as part of a reward scheme for his performance in 2010, which can be cashed in 12 months later.

Ian Gordon, banking analyst at Investec Securities, is expecting compensation provisions for misselling to plunge RBS even deeper into the red with losses of £3.9bn in 2012.

RBS, which is 81% owned by the British state after a £45.5bn bailout, disclosed in November it was taking an additional £400m in claims relating to payment protection insurance.

It also revealed another £50m to cover its computer system failure, which left millions of people without access to accounts, while it is facing further financial pain as the scandal unfolds over misselling of interest rate swap products. On an underlying basis, the bank is likely to show further improvements with core profits of £6.3bn up from £6bn in 2011, Mr Gordon said.

The results come amid political pressure for RBS to be returned to the private sector. Taxpayers are still sitting on a loss of about £14bn as shares remain below the £5 break even price paid by the government.

There is also speculation RBS has hit further troubles in trying to offload the 316 branches to appease EU rules on state aid.

Lloyds, which follows with its results on Friday, is also facing rumours over its branch sale amid doubts the deal with The Co-operative will succeed in time.

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