Dante placed excommunicates in the bottom tier of purgatory. That is where Royal Bank of Scotland lurks financially, even after reporting its first full-year, bottom-line profit in nine years. Only delays to a socking penalty for past US misdeeds made that possible. Unshriven, RBS cannot escape the deadening effects of majority state control via the selldown of shares held by the government.

This can only happen when the bailed-out bank ascends the poet’s layer cake to the realm of greed, where it can pay dividends. New obstacles pushed the shares down 4.5 per cent on Friday to 269p, well below the Treasury’s buy-in price. Fourth-quarter profits missed some forecasts, even as 2017 attributable profits rose to £752m. The costs of what Jefferies terms “incessant restructuring” jumped.

Thankfully, a settlement with the US Department of Justice looks to be covered. The cost is estimated at up to $10bn. Some of that is allowed for within a $4bn conduct provision. RBS’s headline capital buffer is 15.9 per cent of risk-weighted assets. The target is 13 per cent. The excess would be worth $8bn, even before anticipated RWA decreases.

Penance for past sin continued this week with the publication of a report into RBS’s mistreatment of distressed businesses. There is a decent bank beneath the fright mask. The net interest margin has risen to a tolerable 2.13 per cent. An 88 per cent ratio of loans to deposits should fatten this as base rates rise.

RBS is doing just fine, if you ignore the devils poking it with pitch forks. For context, look at RSA, run by former RBS boss Stephen Hester. It announced a 12 per cent jump in underlying profits before tax to £620m this week, with nary a mammoth fine in sight. The insurer is paying out 45 per cent of post-tax earnings in dividends, a ratio that should rise. There remain many better stocks to invest in than RBS.

This article has been amended with the correct figure for RSA’s profits, which were lower than originally stated.

Get alerts on Royal Bank of Scotland Group PLC when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article