In an era of ultra low interest rates, ever tightening regulation and steep legacy fines, times are tough for banks. But taxpayer-backed RBS, which has not made a full-year profit since 2007 and has seen shares slide 36 per cent in the year to date, is having a particularly rough ride. This is largely through problems of its own making.
First up, the scandal that has engulfed the bank's Global Restructuring Group arm. Yesterday, the FCA found that a large proportion of customers who were transferred to this restructuring division were poorly treated, triggering what will be a £400m hit in the fourth quarter from compensation costs. This will eat into profits at the same time as the bank levy, giving RBS a small mountain to climb to simply break even.
There is more trouble ahead, most notably an extremely large bill in the US for misselling mortgage-backed securities.
RBS has already set aside over $5.3bn to cover the cost of litigation in the US, but, like Deutsche Bank, it also faces a potential multi-billion-dollar fine from the Department of Justice. This fine could be so large that RBS has admitted it does not know when it could start paying dividends to shareholders.
The other elephant in the room for RBS is the divestment of subsidiary Williams and Glyn's 300 branches, mandated as part of the bank's £45bn EU state bailout deal at the height of the financial crisis. A sale by the 2017 deadline is looking unlikely. Then the EU could be forced to step in and conduct a fire sale, triggering further financial woes for RBS.
It would be easy to paint CEO Ross McEwan as having the opposite of the midas touch but let's not forget we are looking at the legacies of previous incumbents in the role, including the disgraced Fred 'the Shred' Goodwin.
McEwan has his work cut out to get the bank to the point where the government can sell down taxpayers' 72 per cent stake in RBS. As Meg Hillier MP, chair of the Public Accounts Committee, says in a report out today on Northern Rock, achieving value for money for taxpayers must be the driving ambition of all public asset sales. This means there is a long and arduous road ahead for RBS and its long-suffering shareholders.