RBS beats forecasts with swing to £259m profit
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Royal Bank of Scotland has swung into the black with a net profit of £259m in the first quarter, as the state-backed lender continues to slash costs and clear legacy issues nearly a decade after the financial crisis.
The bank, which is 72 per cent owned by government, beat analyst forecasts of a £50m profit and reversed the £968m loss posted in the first quarter last year.
The profit was boosted by the absence of a large £1.2bn payment made to the Treasury a year ago in order to remove a block on dividend payments, imposed after the bank’s £45.5bn bailout during the financial crisis.
Income rose to £3.2bn in the first quarter, up from £2.8bn a year ago, as the bank continues to increase mortgage lending.
Operating expenses, stripping out one-off items and restructuring, amounted to £1.8bn, compared to £2.2bn a year ago, following a large cost-cutting drive and a focus on digitising the bank.
The boost in income and cost reduction helped RBS post a pre-tax adjusted operating profit of £1.4bn in the quarter, up from £440m in the same period a year ago.
The results come shortly after chancellor Philip Hammond warned that the government’s stake in RBS could be sold at a loss, as the share price continues to languish far below the 502p paid per share to rescue the bank.
Restructuring costs amounted to £577m compared to £238m a year ago as the bank continues to shrink by pulling out of overseas markets, cutting the investment bank and refocusing on UK commercial and retail banking.
Some £54m was earmarked for conduct and litigation, compared with £31m a year ago.
RBS has managed to resolve a number of legacy issues recently, including a settlement announced yesterday with shareholders who allege former directors of the bank, including Fred Goodwin, misrepresented its underlying strength at the time of the £12bn rights
issue in 2008.
The Treasury and Brussels are also assessing an alternative plan to RBS offloading 300 branches under the Williams & Glyn brand, in a move that is set to cost the bank about £750m.
However, RBS has not made any further provisions in the first quarter to cover a looming penalty from US authorities for mis-selling toxic mortgage securities during the financial crisis. RBS set aside £3.1bn at the end of last year for the impending fine, although warned at the time it would probably need to make further provisions.
(Image: PA)
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