Royal Bank of Scotland made a £2 billion pre-tax loss for the first half of 2016, blaming the high cost of past mistakes.
The lender was weighed down by £1.3 billion of litigation and misconduct costs, including more payouts to customers who were wrongfully sold PPI insurance, as well as litigation over treatment of shareholders in 2008, when the bank was rescued.
The bank made a £1 billion loss in the second quarter alone, much bigger than the £247 million loss expected by 11 analysts surveyed by Bloomberg News.
RBS said that the Brexit vote in June will hurt its net interest margin — the profit made on lending to customers at a higher rate than the bank borrows — because it will force the central bank to keep rates lower for longer.
The Bank of England on Thursday attempted to contain the economic fallout of Brexit by slashing rates in half to 0.25%, potentially making it harder for RBS to make money on its portfolio of lending.
“It will squeeze us on the net interest margin, but will it help us lend more? No, because we’ve already been lending at a decent rate,” Ewen Stevenson, RBS CFO, told Bloomberg News in an interview.
RBS shares lost more than 97% of their value since prior to the financial crisis, and dropped by 30% following the UK’s Brexit vote.
The bank noted that mortgage applications fell after the EU referendum in June.
Here’s the chart from the results presentation:
RBS has been majority-owned by the British government since it was bailed out during the financial crisis, and the government has been gradually selling off small portions of the bank in the past two years.
NOW WATCH: MALCOLM GLADWELL: ‘Anyone who gives a single dollar to Princeton has completely lost their mind’
Business Insider Emails & Alerts
Site highlights each day to your inbox.