The private banking arm of RBS has seen its profits contract in 2015.
(Updates with details on Coutts and fine, comments)
Royal Bank of Scotland today said its private banking arm, including its Coutts & Co and Adam & Co businesses, logged an adjusted operating profit of £113 million ($158 million) in 2015, a fall of £77 million from a year earlier, reflecting lower income and higher impairment losses.
A charge for goodwill impairment of £498 million attributed to the business drove an operating loss of £470 million, compared with an operating profit of £99 million in 2014, RBS said in a statement.
The past year has seen RBS spin off much of its non-UK private banking business operating under the Coutts brand, selling it to Geneva-headquartered Union Bancaire Privee, as RBS seeks to return to profitability ahead of any move to fully privatise its shares.
Total income was £644 million, a reduction of £45 million from 2014. Net interest income was £436 million, down 4 per cent primarily due to lower net interest margin. Non-interest income totalled £208 million, a decrease of 11 per cent driven by lower investment and transactional income as the business adjusted pricing to reflect a more competitive market.
Adjusted operating expenses were £518 million, rising 3 per cent with reductions in the direct cost base offset by a higher UK bank levy charge.
Operating expenses totalled £1.101 billion, an increase of £506 million, driven by a goodwill impairment charge of £498 million, and considerably higher restructuring costs of £73 million, which included a share of an asset write down related to software of £91 million, and lower litigation and conduct costs of £12 million.
Net impairment losses totalled £13 million, compared with a release of £5 million, due to higher individual and latent charges, it said.
Total assets under management rose from £13.5 billion in the final three months of 2015 to £13.9 billion at the end of December due to market movements.
In Q4, the private banking arm reported an adjusted operating loss of £13 million, in contrast with a profit of £25 million a year earlier, mainly driven by a higher UK bank levy charge and lower income.
Tax settlements by Coutts
The figures showed that Coutts had paid £75 million ($104 million) to settle two separate tax evasion probes relating to its former Swiss private banking business.
The largest of the two penalties saw the bank pay out $78.5
million (£56 million) to US prosecutors after it admitted
assisting US clients to conceal assets in offshore accounts,
which subsequently helped them evade tax.
In a separate investigation, Coutts paid €23.8 million (£18.8 million) to German prosecutors after a tax evasion probe covering a 10-year period to 2014.
"This latest huge payment demonstrates the ongoing determination of the tax authorities globally to come down hard on anyone thought to have been involved in what may be unacceptable tax practices," John Cassidy, tax investigations partner at national audit, tax and advisory firm Crowe Clark Whitehill, said in a note.
“HMRC [UK tax authority] is no different and is currently implementing a raft of new penalties and offences for those whose offshore assets have yielded untaxed income and gains, including a ‘strict liability’ offence where criminal guilt is assumed automatically and a penalty based on up to 100 per cent of the entire overseas asset," he said.
“HMRC will also soon start receiving a huge amount of data as part of the Common Reporting Standard under which overseas organisations such as banks and trust companies will automatically provide details to HMRC of UK residents with interests in overseas assets and interests," Cassidy added.
Across the whole of RBS, which is still majority-owned by the UK government, it reported a loss attributable to ordinary shareholders of £1.979 billion, compared with a loss of £3.470 billion in 2014. This included elevated restructuring costs (£2.931 billion), as the bank's repositioning accelerated, particularly in the corporate and institutional banking (CIB) business. Litigation and conduct costs (£3.568 billion) increased as further steps were taken to clear legacy obstacles from RBS's path to normalisation, it said.
Around 10:30 GMT in London, shares in RBS were down 8.34 per cent at 223.94 pence per share.