The Courier & Advertiser (Fife Edition)
Investors cheer return to half-year profit for RBS BREXIT:
Taxpayer-owned bank admits it is looking at Amsterdam hub to service EU clients
RBS has reported a half-year profit for the first time since 2014 as the lender outlined plans to use Amsterdam as a post-Brexit EU hub.
The bank, which is still 72% owned by the taxpayer, recorded a £939 million profit for the six months to June 30, which compares with a £2 billion loss in the same period last year.
Second-quarter profit came in at £680m, representing the bank’s second consecutive quarter in the black.
RBS also revealed it has begun contingency planning for Brexit by engaging with the Dutch central bank to use its existing banking licence in the Netherlands, which will see the lender employ 150 staff in Amsterdam.
“We have to be in a position to serve our customers,” chief executive Ross McEwan said.
The bank requires an EU passport to continue operating its NatWest Markets business across the bloc and is the latest financial firm to outline Brexit plans.
On the results, Mr McEwan signalled the Edinburgh-headquartered group is moving on from its troubled past.
“We’re doing what we said we would at our full-year results in February – growing income, reducing cost and improving returns for shareholders, while also starting to deliver a better service for customers,” he said.
“We see the first six months of this year as proof of the investment case for this bank: our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced.”
First-half operating profit came in at £1.95bn compared with a £274m loss last year, while adjusted operating profit rose from £1.15bn to £3bn.
The update found favour with investors as shares lifted more than 3% in early exchanges. .
However, RBS also disclosed the City watchdog is undertaking a probe into the bank in relation to money laundering, without giving further details. The group also detailed £342m in second-quarter conduct and litigation costs and £213m in restructuring charges.
When added to costs booked in the first quarter, it takes the total for the first half to more than £1bn.
The group has racked up several billion in litigation and conduct costs since it was rescued by the Government at the height of the financial crisis.
Last month, RBS agreed a £4.2bn US settlement over claims it mis-sold toxic mortgage bonds in the run-up to the crisis, and it took a £151m charge in its second quarter as a result of the deal.
However, it is yet to reach a separate settlement with the Department of Justice, which is expected later in the year, although Mr McEwan warned there is a chance it could drag on into next year.
“RBS swung back to a pretty healthy profit in the first half,” said Neil Wilson, senior market analyst at ETX Capital.
“Cost-cutting is doing the job, while fewer conduct charges is helping a lot.
“A looming fine for mis-selling mortgage-backed securities in the US casts a long shadow but the omens are looking a lot more promising for a return to private ownership.
“Based on these figures, the return to genuine sustained profitability in 2018 appears a lot more realistic.”
Shares in RBS closed nearly 2% higher, up 5p to 261.2p.