Royal Bank of Scotland reports rare profit in first quarter

Friday 02 May 2014 18.08
This is only the sixth time RBS has reported a quarterly profit since its £45 billion rescue during the 2008 financial crisis
This is only the sixth time RBS has reported a quarterly profit since its £45 billion rescue during the 2008 financial crisis

Part-nationalised Royal Bank of Scotland trebled its profit in the first quarter, benefiting from improved cost control and a reduction in impairment costs.

The bank, which is 81%-owned by the UK government and owns Ulster Bank here, reported an attributable profit of £1.2 billion.

This is only the sixth time it has reported a quarterly profit since its £45 billion government rescue during the 2008 financial crisis.

The bank reported operating profits of £1.5 billion, up from £747m the year before. Pre-tax profit came to £1.6 billion, compared with £826m the same time the previous year.

Analysts had forecast an attributable profit of £200m, an operating profit of £800m and a pre-tax profit of £300m, according to a poll of eight analysts provided by the bank. 

The first-quarter results were lifted by the absence of any provision for misconduct issues that have haunted the bank since the global financial crisis. 

And in another major boost, RBS revealed that impairments across its loan book tumbled by 65% in the reporting period.

RBS said its operating expenses meanwhile fell 6% to £191m, as the group shed about 6,300 jobs mostly at its retail and markets division.

Shares in the bank closed 7.3% higher in London trade today.

"Today's results show that in steady state, RBS will be a bank that does a great job for customers while delivering good returns for our shareholders. But we still have a lot of work to do and plenty of issues from the past to reckon with," chief executive Ross McEwan said in a statement. 

RBS is among several major banks assisting regulators around the world investigating allegations of collusion and price-rigging in the global currency market. Investors have also filed lawsuits against the bank saying they were misled over its massive rights issue in 2008 and claiming billions of pounds back. 

It said investigations into its conduct continued to create uncertainty and the timing and amounts of further settlements were uncertain.

RBS said it was shaking up computer systems for NatWest and Ulster Bank as part of a wider £750m three-year programme to improve "safety, security and resilience" - following a series of IT failures across the group in recent years.

The RBS results were published a day after rival Lloyds Banking Group revealed that its underlying profits improved in the first quarter, boosted by falling impairments, cost-cutting and the broader economic recovery.

However, LBG - which is 25% state-owned - added that its net profit sank by almost a quarter to £1.15 billion. 

Meanwhile, RBS said Nathan Bostock will cease to be finance director from May 19 and leave the RBS board later this month. 

RBS previously announced Bostock is leaving to join rival Santander UK and will be replaced by Credit Suisse investment banker Ewen Stevenson. 

The bank said Bostock will not receive any compensation for loss of office, although he will continue to receive salary, pension and benefits up to the point his employment ends on August 18.