Britain's RBS sets $128 million aside to cover Brexit uncertainty

LONDON -- Royal Bank of Scotland has taken a 100 million pound ($128 million) impairment provision to account for greater economic uncertainty in the first concrete sign Brexit is clouding the outlook of a big British bank.

The provision means RBS is concerned that its customers might become less able to pay their debts when Britain leaves the European Union in five months' time. RBS is the first big UK bank to put money aside for this eventuality.

CEO Ross McEwan said RBS was taking into account the possibility of more negative outcomes from the Brexit negotiations, under new accounting standards that require banks to be better prepared for possible future losses.

"There's a lot more uncertainty in the marketplace until we get agreement, and that's what this is reflecting," McEwan told reporters on a call, referring to the provision.

The fortunes of major lenders like RBS are closely intertwined with the health of UK consumers and businesses.

The bank has been less upbeat about the consequences of Brexit than some of its peers, with McEwan warning recently that Britain could slip into recession if it crashes out of the EU with no deal.

Bank of England Deputy Governor Sam Woods said on Thursday banks in Britain must hold enough cash to withstand any disorderly Brexit hitting financial markets.

RBS's rival Lloyds said on Thursday it was confident that negotiations between London and Brussels could still deliver a withdrawal agreement, which remains elusive even after years of tense talks.

Both banks said that they had seen no sign borrowers' ability to service their loans had deteriorated so far.

PROFIT MISS

McEwan said he had participated in a call with Prime Minister Theresa May and executives last week and received an optimistic signal that a Brexit deal could be reached.

But with the March 2019 deadline fast approaching, businesses remain in the dark about how they will interact with EU markets and the impact Brexit will have on the UK economy.

The provision, announced with RBS's third quarter results, took the bank's impairments for the period to 240 million pounds, up from 143 million pounds in 2017.

It also reported a pre-tax profit of 961 million pounds and an attributable profit of 448 million pounds. This was below the 507 million pounds expected by analysts, according to a bank-compiled average of their estimates.

RBS, whose shares opened 4 percent lower on Friday, reported a common equity tier one capital ratio of 16.7 percent.

That leaves the bank's capital well above its target of 13 percent, even after it paid its first dividend in a decade and a hefty fine to US authorities earlier this year.

The bank took another 200 million pound provision for mis-sold payment protection insurance - Britain's costliest such scandal that has seen RBS alone pay out over 5 billion pounds.

It gave no clue as to its future dividend policy - information shareholders are hungry for after being starved of payouts for 10 years.

source: news.abs-cbn.com

Stocks sour as Apple results leave bitter aftertaste

LONDON - Disappointment over US corporate earnings, most notably at Apple Inc., the world's largest company, pushed stocks lower on Wednesday and investors towards the shelter of bonds.

Retrenchment and caution dominated trading in other assets, with the dollar slipping a little further from its recent highs and commodities such as gold and oil resuming their downturn.

Stocks will look to corporate earnings on both sides of the Atlantic for direction. Meanwhile, the Greek parliament will vote on reforms it must undertake for talks on a multi-billion euro bailout to start this week, which will help determine broader sentiment in Europe.

The FTSEuroFirst 300 index of leading European shares fell 0.5 percent in early trade to 1,588 points. Germany's DAX fell 0.6 percent to 11,534 points and France's CAC 40 was down 0.5 percent at 5,079 points.

Britain's FTSE 100, which is more exposed to the mining and energy sectors, was down 0.7 percent. British investors are also awaiting the latest Bank of England policy minutes, which may show a more hawkish tilt towards raising rates.

"Despite a beat at the earnings level and a surge in revenue from China, the market latched onto disappointing overall iPhone shipments relative to street expectations," said Jim Reid at Deutsche Bank in London, of Apple's results.

"Combined with a near-4 percent fall for Microsoft in extended trading after a similarly disappointing report, (U.S.) futures have fallen this morning."

S&P futures showed Wall Street expected to open down around 0.5 percent.

European bourses were also weighed down by a 4 percent fall in chip maker Arm Holdings. Although ARM posted a 32 percent rise in second-quarter profit, the results from Apple, a major customer, hit hard.

Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan slid 1 percent, its biggest decline in two weeks.

Japan's Nikkei stock index ended down 1.2 percent, snapping its six-day rising streak and pulling away from Tuesday's nearly four-week closing high as the Apple news reverberated on related tech shares.

STERLING EFFORT

Following its tumble to a five-year low on Monday, investors remained wary of gold. It reversed Tuesday's rebound to trade down 0.7 percent on the day to $1,090.95 per ounce.

"We believe gold should range trade around current levels, but do not dismiss the possibility of further price falls, given the lack of safe-haven interest," Barclays commodities analysts wrote in a note to clients.

Crude oil futures were still under pressure too, as investors worried about ample supply. U.S. crude was down 1.5 percent at $50.10 and Brent shed more than 1 percent to $56.43.

In currencies, the euro edged up to $1.0950 , continuing its rebound from Monday's three-month low of $1.0808, and the dollar index slipped 0.1 percent to 97.218. On Tuesday, it rose as high as 98.151, a level not seen since late April.

Sterling was the biggest mover among major currencies. It was up 0.4 percent against the dollar at $1.5615, supported by expectations the Bank of England will raise interest rates around the turn of the year.

On Greece, Standard & Poor's upgraded its sovereign credit rating on Tuesday by two notches and revised its outlook to stable from negative, citing euro zone countries' initial agreement to start negotiations with Athens on a third bailout.

European bond markets awaited the Greek parliament vote, sticking to narrow ranges. Benchmark 10-year Bund yields fell a basis point to 0.77 percent, and Italian yields were steady at 1.96 percent.

"The newsflow since last week's deal does not fill us with great hope about the design of the pending deal, which is one reason we retain a fairly pessimistic view about what has

been solved in Greece," said Michael Michaelides at RBS.

The yield on 10-year U.S. Treasuries slipped a basis point to 2.33 percent.

source: www.abs-cbnnews.com