Relief for chief as RBS returns to profit
ROYAL BANK of Scotland has swung back into the black, reporting its first quarterly profit since 2015.
The taxpayer-owned lender reported a better than expected £259m profit in the first three months of the year, up from a £968m loss in the same quarter last year.
The numbers will come as welcome relief to chief executive Ross McEwan, who has presided over a string of recent poor results, which tally up to a staggering £58bn of losses since RBS was bailed out by the Government at the height of the financial crisis.
He said: “This bank has a very strong core with great potential, and we believe that, by going further on cost reduction and faster on digital transformation, we will deliver a simpler, safer and even more customer-focused bank, with a compelling investment case.”
The bank, which is 72 per cent owned by the Government, said its adjusted operating profit also rose in the quarter, from £303m to £1.3bn.
RBS also booked £577m in restructuring costs.
In February, Mr McEwan ordered a £2bn four-year cost-cutting drive, expected to result in significant job losses and branch closures. The bank took £278m in costs out of the business in the period.
Last week, Chancellor Philip Hammond made the stark admission that the Government is prepared to sell its stake at a loss to the public purse.
The Government bought its 72 per cent holding in the bank for £45bn in 2008, at £5.02 a share, as part of a bailout at the height of the financial crisis, but its shares are now trading at around half that price.
It is understood that only once RBS’s legacy issues, such as fines in the US and state aid obligations, are dealt with, will the Government begin selling down the taxpayers’ stake.
Asked whether the bank owes the public an apology in light of the Chancellor’s comments, Mr McEwan said: “I don’t think it’s a matter of an apology, we just have to go back to when the Government stepped in. The price that was paid was the price of the day. It was the right thing to do to save the bank. The stake sale is in the hands of the Government.”
The results come a day after the bank moved closer to reaching a settlement with all five shareholder groups that brought compensation claims against it in connection with its 2008 rights issue, overseen by disgraced former boss Fred Goodwin.
Mr McEwan said the lender, which has come under fire over its spiralling legal costs of defending Mr Goodwin, said he believes the bank has a “strong defence to the claim”.
The case, which comes to trial next month if a settlement is not reached, is becoming one of the most costly civil defences in British history.
Analyst Laith Khalaf, at Hargreaves Lansdown, said: “RBS has been quick off the blocks in 2017, with a strong performance that has comfortably beaten expectations. The UK retail bank appears to be chugging along quite nicely, and even the investment bank chipped in with some decent numbers.
“It’s too early to pop the champagne corks though, because the US Department of Justice is likely to play the role of party pooper at some point, by landing RBS with a massive fine.”