RBS makes first quarterly profit since 2015 as recovery continues

(c) Sky News 2017: <a href="http://news.sky.com/story/rbs-makes-first-quarterly-profit-since-2015-as-recovery-continues-10853855">RBS makes first quarterly profit since 2015 as recovery continues</a>
 

Royal Bank of Scotland (LSE: RBS.L - news) (RBS) has reported progress in its recovery, announcing its first quarterly profit since 2015.

The bank said its attributable profit - a pre-tax profit measure - for the first three months of the year came in at £259m.

That compared to a loss of £968m in the same period last year and followed an annual loss for 2016 of £7bn. It took the group's total losses since its taxpayer bailout in 2008 to £58bn.

The performance prompted chief executive Ross McEwan to order a fresh cost-cutting drive, with the £2bn initiative already resulting in dozens of fresh branch closures in a drive towards digital banking.

RBS saw adjusted operating profits jump 30% to £1.3bn as the economy remained resilient in the face of the UK's vote to leave the EU. Net (LSE: 0LN0.L - news) lending jumped by £3.7bn on the previous quarter.

However, it booked restructuring costs of £577m.

Mr McEwan said: "These results reflect very much what we talked about at full year.

"Firstly, a strong and improving core bank and secondly, fewer remaining legacy issues.

"Core income is up on last year, adjusted costs are down, and we're making better use of capital. These drive a 13.8% adjusted return on equity, an improving productivity in the core bank, and are important steps on our path to profitability."

He added: "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."

Shares (Berlin: DI6.BE - news) rose almost 5% by the FTSE 100 close in response to the results - released just a week after the Chancellor, Philip Hammond, confirmed he was prepared to sell off the taxpayer's 72% stake in the bank at a loss.

Its share price is currently running about half the average price paid for the stock during its rescue at the height of the financial crisis.

The price reflects the extent to which the group remains mired by legacy issues - both at home and abroad. It has already set aside £7bn to cover a looming penalty in the US alone covering alleged pre-crisis mis-selling of mortgage-backed securities.

RBS announced on Thursday it had moved a step closer to resolving shareholder claims over a 2008 rights issue which preceded its bailout as a trial date looms next month.

It said agreements had now been reached with 87% of the original claimants in the litigation, who alleged the bank had misrepresented the state of its financial health.

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