EDINBURGH – Royal Bank of Scotland said on Tuesday it would need another 18 months to strengthen its capital position enough to satisfy regulators.
Regulatory approval for the state-backed bank's capital levels is considered crucial for boosting RBS's share price, which has been hurt by speculation it may need to raise more money.
"Our capital ratios are transformed but we have another 18 months or so to get them in the final shape that we and our regulators want," Chief Executive Stephen Hester told shareholders at bank's annual meeting in Edinburgh.
RBS has been pushing for the government to begin selling its 81 percent stake in the bank, the result of a 45.5 billion pound ($69.42 billion) bail-out in 2008 during the financial crisis.
The government is keen to sell but also needs to get a good deal for taxpayers, which are sitting on a paper loss of 18 billion pounds, based on RBS's current share price.
The Bank of England has said UK banks must raise 25 billion pounds of extra capital by the end of this year to absorb any future losses on loans. It has not given specific guidance to individual banks, but analysts expect the biggest shortfall to be at RBS.
Hester said the bank would meet global capital requirements years ahead of deadline and was aiming to hold core capital of 10 percent by the end of next year under these global rules known as Basel III. That would be up from 8.2 percent at the end of March, which is lower than most major European banks.
"We're confident of getting to the right place on capital substantially earlier than all the rules require. I don't think it's a timing relevance for privatization," Hester told reporters after the shareholder meeting.
NO MORE SKELETONS?
RBS said it should have mostly completed a restructuring in 2014, enabling the government to start selling its stake.
"We have the ambition of putting the government in a position to sell the shares towards the end of 2014. Then it is the government's decision," Chairman Philip Hampton said.
Hampton said more job cuts were likely, adding to the 37,000 shed since the financial crisis. "Banks need to be more efficient, and from time to time that will mean more job losses," he said.
The bank's annual meeting at its Edinburgh headquarters was less stormy than in the past, with 127 shareholders attending, well down on previous years. There were few questions on pay, which has been a hot topic at earlier meetings.
"We've been pretty tough on pay. But we need to compete and be commercial," Hampton said when urged by a shareholder to freeze executive pay.
The bank said 99.3 percent of shareholders approved its pay resolution.
RBS said its five-year turnaround plan under Hester was on track, although it continues to be hit by legacy problems. Since last year's shareholder meeting it has been one of three banks to be fined for manipulating Libor interest rates, it had a major computer systems failure, and its plans to sell hundreds of branches collapsed.
"Can we assume there are no other skeletons in the closet," said Malcolm Hill, a private shareholder.
"One of the disappointing things of the financial crisis is how many skeletons have come out of the cupboard, it wasn't just about banks getting into financial difficulties, it was a whole culture," Hampton said. "These things are very disappointing and why we need to go through a significant period of culture change. I think that we are through the worst."
($1 = 0.6554 British pounds)
(Editing by Kirstin Ridley and Jane Merriman)