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As trial date nears..

‘Strong and improving ‘ RBS unveils Q1 profit

RBS St Andrew SqRoyal Bank of Scotland signalled a slow return to health by reporting an attributable profit of £259m for the first quarter.

This compared with a loss of £968m in the same period last year.

The core bank had an adjusted operating profit of £1.3bn, up 30% or £303m on last time.

However, the bank continues to suffer big hits to its balance sheet and took restructuring costs of £577m.

Costs are down £278m and represent 37% of the bank’s £750m cost-cutting target for 2017.  Lending to the UK economy increased by £3.7bn from Q4.

Chief executive Ross McEwan said today he was confident the bank will be back in profit next year. The bank made a £7bn loss for 2016, bringing total losses since RBS was bailed out by the taxpayer in 2008 to £58bn.

The number of active mobile users has increased by over 4% to 4.3 million since Q4 2016 which will and total branch service transactions have reduced by 10% since Q1 2016.

The bank is to close 250 branches this year, from 1,315 at the end of 2016.

Mr McEwan (below) said:We’re pleased to post a bottom line profit of £259 million for Q1. 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.

“Our six core businesses made an adjusted operating profit of £1.3 billion in Q1. RBS has now averaged an adjusted core operating profit of over £1 billion for the last nine quarters.

“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 latest figures follow the bank’s announcement yesterday that it has reached a further settlement with another group of shareholders pursuing a claim over its 2008 rights issue.

It will not head off a trial involving several of the the bank’s former directors which is due to begin next month.

Mr McEwan today admitted it could last for months and potentially years.

The bank reached a deal with four shareholder groups in December 2016 and yesterday said it has concluded a full and final settlement, without any admission of liability, with those representing 40% by value of the remaining claimant group. 

As a result of these settlements, RBS has now reached a resolution with shareholders representing 87% of the original claims by value in the litigation.

As part of this settlement, RBS has made available an additional sum in respect of the legal costs incurred by the claimants since December 2016, subject to agreement and claim validation.

Mr McEwan said: “We have been very clear that putting our legacy issues behind us is a priority so that we can  focus on building the best bank for our customers, shareholders and employees.  


Comment: Could RBS fall into foreign hands?


“We are pleased to have reached this agreement. We will continue to explore the possibility of settlement with the remaining claimants but if we cannot settle on agreeable terms we will defend the claims at trial.”

On Wednesday it was warned it could face an inquiry by the Treasury Select Committee over its decision to spend millions of pounds of taxpayers’ money defending its former disgraced chief executive Fred Goodwin in court.

The RBS Shareholders Action Group is suing the bank, which is still 71% owned by the state, over its £12bn rights issue in 2008, claiming that senior executives at RBS, including Mr Goodwin, misled investors over the true financial strength of the bank nine years ago.

RBS expects to spend £125m defending the civil lawsuit, including £6.5m already paid for the legal fees of Mr Goodwin and his fellow executives, including former chairman Sir Tom McKillop.

The case is due to come to court on 22 May, with Mr Goodwin set to give evidence in person on 8 June, the same day as the general election, and 9 June. Sir Tom and fellow former director Johnny Cameron will also give evidence.

A number of those on the TSC have said that the cost of defending the case is inappropriate and warned they may investigate.

Conservative MP Jacob Rees-Mogg told The Independent: “This affair is being closely watched by members of the Treasury Select Committee and is the type of issue the Committee may well look into once legal proceedings are completed.”

Labour member Rachel Reeves, added: “If RBS loses this case, the bank will have a lot of explaining to do to staff, shareholders and the public on why it spent a fortune on this case.”

The Treasury has sold more shares in Lloyds Banking Group, reducing its stake to 0.89%. The government believes it may be back fully in private hands within weeks.

Barclays says its profits more than doubled in the first three months of the year, boosted by better performance across the board.

Pre-tax profit for the first quarter was £1.682bn, up from £793m for the same period last year.

Chief executive Jes Staley said it had been “another quarter of strong progress towards the completion of the restructuring of Barclays”.

 

 

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