RBS Investment Bank Says It Expects Declining Income in 2016

  • CIB unit had a difficult start this year due to tough market
  • Operating loss in fourth quarter narrows to 245 million pounds

Royal Bank of Scotland Group Plc, the U.K. government-controlled lender, warned its securities unit may experience “modest income erosion” in 2016 as it joins other European investment banks battling declining earnings from most fixed-income activities.

RBS’s corporate and institutional unit had a difficult start to the year, given overall market conditions, the firm said in its full-year earnings statement Friday. The division “has plans through to 2020 to deliver acceptable returns and will now be focused on serving our largest and most valuable corporate clients,” RBS said.

The business has been scaling back for years by cutting jobs, exiting some fixed-income assets and shrinking its geographic footprint amid regulatory pressures and a slump in revenue. It has been followed by firms including Deutsche Bank AG and Credit Suisse Group AG, which are also eliminating jobs at their debt-trading units as stricter capital requirements erode returns.

RBS’s corporate and institutional unit posted an operating loss of 245 million pounds ($343 million) in the fourth quarter, down from a loss of 536 million pounds in the same period a year ago, as it booked smaller litigation costs. The unit’s risk-weighted assets fell by 21 percent in the period as it transferred U.K. and western European portfolios to its commercial banking arm.

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