RBS Swings to Better Than Expected Quarterly Profit -- Update
April 28 2017 - 6:13AM
Dow Jones News
By Margot Patrick
LONDON-- Royal Bank of Scotland Group PLC posted a
bigger-than-expected net profit in the first quarter and said it is
still on track for a full-year profit next year.
RBS has posted nine years of consecutive annual losses since
being bailed out by the U.K. government in the financial crisis,
with only a few profitable quarters along the way.
Net profit in the first three months of 2017 was GBP259 million
($334.2 million), compared with a GBP968 million net loss in the
first quarter of 2016 and much higher than analyst expectations of
around GBP50 million.
The bank's core operations, stripping out units and assets it is
shedding, made GBP1.33 billion in pretax profit, up 30% on the
first quarter of 2016, mainly because of better conditions for
client trading in its shrunken markets business. It also grew its
loan book as continued low interest rates helped lift mortgage
lending.
The U.K. government owns around 70% of RBS after bailouts of the
bank in 2008 and 2009. Treasury chief Philip Hammond said last week
the government may have to sell the shares for less than the
GBP45.5 billion it invested. The bank's entire market
capitalization is currently around GBP30 billion.
Chief Executive Ross McEwan told reporters on a call "the price
paid in was the price of the day" when the government made the
capital injection. "A lot happened since then."
He said it is up to the government to decide when to start
selling its shares but that the bank needs to get past two major
issues.
The biggest hump to get over is a settlement with U.S.
authorities over its role in the sale of toxic mortgage-backed
securities before the financial crisis. RBS has set aside $8.3
billion for potential penalties and Mr. McEwan said Friday he's
confident of a conclusion of the matter this year.
The bank also needs European Commission approval of a plan to
keep 300 branches it was meant to sell under a 2009 state aid
agreement. After a string of setbacks trying to sell the branches,
RBS proposed finding other ways to move small business customers
off its books and promoting banking competition.
The U.K. government submitted an alternate plan to the European
Commission that is now under review.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
April 28, 2017 05:58 ET (09:58 GMT)
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