McEwan hails figures
RBS reports sharp rise in profits for first quarter
Ross McEwan: ‘a good set of results’ (photo by Terry Murden)
Royal Bank of Scotland has reported a sharp rise in attributable profit for the first quarter to £792 million against £259m in the corresponding period last year.
Profit before tax rose to £1.213bn, a 70% rise on £713m last time. Despite the positive performance, shares in the bank fell because of the lingering uncertainty over the size of its unsettled fine in the US.
As further justification for branch closures the bank said branch counter transactions were down around 7%.
“Our customers continue to migrate from physical to digital channels at pace,” chief executive Ross McEwan told a media conference call, adding that “branches will be a very important part for us.”
Asked by Daily Business about the current review of the 10 Scottish branches which were given a temporary reprieve from closure, he said new consultants had been appointed and the review was continuing. “I have no update,” he said.
He said he had visited villages to assess the branch situation and one postmaster was delighted with the tie-up with the bank.
On threats to mobile vans, he said some were cutting frequency where there was less demand for the service, but he said 440 communities were reached by the vans every week and there were 488 mobile branch stops across Scotland.
Today’s figures showed ATM transactions were down 17% and cheque usage was down 17%.
The bank reported a strengthening of its capital reserves with its CET1 ratio up 50 basis points to 16.4% from 15.9% at full year 2017.
The cost to income ratio has also improved, down from 76.1% to 60.5% against a 2020 target of below 50%.
In a statement, Mr McEwan said: ‘”In the first three months of 2018, we made a pre-tax profit of £1.2 billion, up 70% on the same period last year. This contributed to a bottom line profit in the period of £792 million, exceeding the full year 2017 profit we reported back in February.
“This is a good set of results, showing the progress we are making, despite a more competitive market. Our income is up, costs are down and our capital has strengthened again.”
Operating costs decreased by £442 million, or 18.0%, compared with Q1 2017. Excluding strategic and litigation and conduct costs, costs decreased by £39 million, or 2.1%, and FTEs reduced by 7.0%.
The bank said 5.75 million customers now regularly using its mobile app, 21% higher than Q1 2017 and 5% higher than Q4 2017.
It said 55% of personal unsecured loans sales are via the digital channel, 39% higher than Q1 2017. Business Banking digital current account openings accounted for 82% of total accounts opened, up from 59% in Q1 2017.
Russ Mould, investment director at AJ Bell, said: “Royal Bank of Scotland becomes the latest UK bank to see its shares fall on the publication of first quarter results. The numbers themselves are fairly impressive with profit trebling year-on-year to a level significantly above consensus estimates, helped by reduced running costs.
“However, this is overshadowed by the looming threat of a fine for mis-selling mortgages in the US ahead of the credit crunch. Estimates on the scale of the fine run from $1bn all the way up to $9bn and RBS has currently set aside £3bn to cover it.
“For RBS to be fully rehabilitated this situation needs to be resolved and the company also needs to move out of state hands and resume dividend payments, so despite an impressive quarterly performance there’s still plenty for management to do.”