Royal Bank of Scotland Group’s (RBS) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Howard Davies – Chairman

Earlier actions have helped deal with the present uncertain times

“The action that’s been taken over the last few years to de-risk the balance sheet, to run down non-strategic assets and focus on core target markets is positioning us well to deal with the current market uncertainty..”

Ross McEwan – CEO & Executive Director

On Brexit

“The UK is our home market and banks reflect the economies they serve. We know that an economic slowdown as a result of the leave vote will have an impact on us. But, I think, it’s too early to assess what that fall impact will be. What we do know is that the UK economy starts from a position of relative strength with good fundamentals, and we like its long-term prospects. If a slowdown does occur, our funding, capital and liquidity strength means that we will be there to support the UK businesses and households when they need us.”

On the performance this quarter

“our core bank delivered another solid performance this quarter, and we continue to work through as outstanding legacy issues are within our control. Our capital and liquidity positions are strong. Our costs are coming down in line with our plan and customer service is improving. There is much more to do but we are making good progress.”

Ewen Stevenson – CFO & Executive Director

A weaker credit market after the Brexit vote

“…post the referendum, while the credit outlook has weakened, we’ve substantially de-risked our loan exposures over the recent years.”

A focus on cost reduction going forward

“With the outlook now for a tougher income environment, we know we need to be relentless on costs. We think we’re building up a pretty credible track record of delivery on this. Over the last 2.5 years, we’ve taken out £2.5 billion of cost or 21% of our cost structure. That’s a compound annualized reduction in nominal terms of 9%. But we recognize that we need to continue to target this sort of reduction for a number of years until we get our overall cost structure back to what we consider to be acceptable and competitive levels.”

A reduced appetite for UK real estate

“In recent weeks, UK commercial real estate exposure has received a lot of attention from the investment community. In short, we don’t feel overly exposed. Given our history, we’ve had a cautious new business risk appetite in the sector, and we’ve dramatically shrunk our legacy exposure.”