RBS expects more one-off charges, reiterates 2018 profitability target

Royal Bank of Scotland's chief executive Howard Davies reiterated the bank's target of returning to profitability next year, as he announced further one-off costs and said the Brexit process was unlikely to hit it as hard as peers.

At the bank's annual general meeting, Davies said the group expects to take further significant one-offs in 2017, particularly related to conduct and litigation charges and restructuring, leading to a bottom line loss at the end of the year before targeting a return to profitability in 2018.

"Reporting a bottom line profit for 2018 would be a huge milestone for the bank, after what will, by then, have been ten extremely tough years of losses," he said.

As far as Brexit is concerned, Davies said RBS would be less affected than many of its peers, "given the shape" of the business and its large domestic focus.

"Our aim is to ensure continuity of service for our EU customers and we are actively exploring options to allow us to do so.

"One potentially significant outcome of the vote to leave the EU is that we might also be facing a second Scottish referendum. Before the last referendum, we said that RBS would continue its support for Scotland but would move its registered office to London. If there is a second referendum we will keep you informed of any contingency plans we might put in place."

Also on Thursday, the bank outlined new proposals to reduce incentives for executives and streamline its pay policy.

"The Committee has been looking to develop a plan that aligns executives with shareholders predominantly through long-term shareholding. It also aims to discourage the potential for excessive risk-taking through being built around more meaningful and achievable performance tests."

RBS said shareholding requirements for executive directors will rise from 250% to 400% of salary for the chief executive and from 125% to 250% for the chief financial officer. In addition the maximum long-term incentive award will be cut by up to 40%, in line with the growing consensus on the need to restrain executive pay.

There will be a single long-term incentive, with no annual bonus, RBS said.

At 1450 BST, the shares were down 0.7% to 261.40p.