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RBS reports first half-year profit in three years

Royal Bank of Scotland (RBS) has announced its first half-year profit for three years, declaring it as “proof of the investment case for this bank”.

The lender, which remains more than 70% owned by the taxpayer following its 2008 bailout, reported pre-tax profits of £939m for the six months to 30 June.
That compares to a loss of more than £2bn in the same period last year.
The bank said it had built on the £259m profit achieved in the first quarter and was clearly now moving away from the legacy issues which have held it back as operating profits came in just shy of £2bn.
Litigation and conduct costs hit £396m in the half-year, the bank said, including a further £151m charge in respect of its £3.6bn mortgage-backed securities mis-selling settlement with the Federal Housing Finance Agency in the US.
A larger penalty is expected following the conclusion of negotiations with the Department of Justice.
There was also a £25m hit booked relating to the recent settlement of the 2008 rights issue shareholder action – a deal which averted the prospect of then-chief executive Fred Goodwin having to give evidence in court.
Restructuring costs came in at £790m.
Chief executive Ross McEwan said: “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.

Image: Ross McEwan has run RBS since October 2013
“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.”
The bank’s share price rose 4% when the FTSE 100 opened for business but at 267p per share it still remains well below the 502p average paid by the Government to rescue the bank.
The sale of shares was suspended by the Government last year as RBS grappled to resolve its conduct issues.
The bank also confirmed in its results that it had begun its contingency planning for Brexit.
It said that it was engaging with the Dutch central bank on using its existing banking licence in the Netherlands to maintain its EU passporting rights – suggesting the impact on UK jobs would be minimal.
As UK regulators move to ensure banks do not get out of their depth on lending to consumers – amid a boom in credit and debt levels – RBS looked to ease any concerns by saying its lending growth had been within “its risk appetite”.
It also pointed to its buffers being well above its 13% target.
UK lenders have been given until September to prove they are not repeating mistakes of the past by getting out of their depth.

Source: Sky

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