RBS: June's tech enormo-cock-up cost us £125m
Hardly any of which went to any actual fixing of stuff
RBS's software upgrade blunder in June has cost the banking group £125m so far this year, with further costs expected. The bulk of that money was spent on compensating customers, with the cost of the actual technical fix "unlikely to cost a meaningful amount", according to group finance director Bruce Van Saun.
RBS also clocked up two other "one-off" costs in what has proved to be a heavy six months for the bank: with a £50m paid out to small businesses after RBS missold them insurance (interest rate swaps) and £135m set aside to compensate customers to whom it had missold payment protection insurance.
Introducing RBS's half-yearly financial results [PDF], CEO Stephen Hester said:
The first half of 2012 saw RBS make good progress on both of the jobs that make up our recovery plan. We have continued to make the bank safer and stronger as we clean up problems of the past.
RBS revealed the group made a pre-tax loss of £1.51bn in the past six months, on a revenue of £13.57bn.
The loss is almost double the loss the group made in same six months the year before - when it clocked a pre-tax loss of £790m after revenue of £15.90bn. Revenues have slipped 15 per cent since last year.
CEO Hester attempted to put a bright spin on the increasing losses by assigning some of them to "one-off items" and drawing attention to "broadly stable operating profit" over the past two quarters. One-offs aside, he said that underlying biz costs were down 3 per cent compared to last year. That was partly due to reducing staff headcount by 5,700.
Fixing the tech bit won't be expensive
Little of the £125m set aside in the Glitch Payout will be making its way into RBS's IT department. Most of the money went on "customer redress" – refunding late payment fines and compensating people who suffered disruption when their bank accounts seized up. More compensation claims are possible in the next three months, RBS's financial statement warned.
In an analyst's call on the results this morning, Van Saun said that he didn't expect redressing the actual technical flaw to cost much money. Citing early findings from RBS's investigation into the incident, he said:
I do think that the first findings show that it will not cost a meaningful amount to rectify this: We'll be simplifying the batches and tightening procedures a bit.
In response to an analyst's question about RBS's general investment in technology, Van Saun claimed that RBS has been putting money into its core systems for several years:
I should be clear that over the first 3.5 years of our recovery plan, we've increased tech spend quite significantly and we've increased spend on the infrastructure as well as the fancy new stuff.