(qlmbusinessnews.com via telegraph.co.uk – – Fri, 4 Aug 2017) London, Uk – –
The Royal Bank of Scotland (RBS) has posted its first half-year profit in three years, as the taxpayer-controlled bank said it may move some operations to Amsterdam after Brexit.
The bank made £939m in profits in the six months to June, beating analyst expectations, compared to a £2bn loss last year.
The Treasury declined to provide an update on when it plans to sell its 72pc stake.
Ross McEwan, RBS chief executive, said that the potential Amsterdam move would affect around 150 staff in its NatWest Markets business.
He said the bank was “advancing discussions” with Dutch authorities about repurposing an EU banking licence it picked up through its disastrous acquisition of ABN Amro prior to the financial crisis.
But he cautioned that it was not a done deal and depended on the outcome of Brexit talks, saying: “It’s in case we do need it. We’ll be operationally ready if required. If we do have to make some changes, we will set up an operation in Amsterdam.”
RBS shares jumped more than 4pc to around £2.67 in early trading.
Despite the profitable start to the year RBS restated that it does not expect to make its first full-year profit in a decade, instead predicting a return to the black in 2018.
This is due to an expected multi-billion-pound fine in the second half from the US Department of Justice for its role in selling subprime mortgages before the crash.
Analysts expect the DoJ fine to be around £5bn-£6bn, although estimates range from £4bn-£15bn. RBS made no update on provisioning for the fine this morning, despite only having around £3bn left in its compensation pot.
Mr McEwan conceded the fine may not land this year amid disarray at the DoJ under the Trump presidency. He said: “We don’t have an update on that. It may not be done this year but I’m still optimistic it will be done.”
Unlike Barclays and Lloyds, RBS did not set aside any more money for PPI claims in addition to its existing £4.9bn pot. It has already paid out £3.8bn.
The bank’s core high street and small business lending arm enjoyed a good period, doubling half-year profits to £1.1bn, up from £533m.
But the group was once again weighed down by exceptional restructuring and misconduct costs, running to a combined £1.2bn.
This figure included the first payment of £151m towards a separate £4.2bn settlement with US housing authorities over misselling toxic mortgages.
Mr McEwan also fired a warning about Britain’s consumer credit glut, after Bank of England governor Mark Carney ordered banks to explain their consumer lending policies.
He said: “Consumer credit has increased by 10pc over the last year and is outstripping wage growth. The Bank of England is rightly asking questions.”
Mr McEwan pointed out RBS was focussing on expanding secured credit including mortgage lending, with unsecured making up only 4pc of its total. In business lending he said it was being “cautious in areas like real estate”.
When asked if there was an update on selling the taxpayers’ stake in RBS, the Treasury referred the Telegraph to chancellor Philip Hammond’s statement in the Spring Budget that: “The government will continue to seek opportunities for disposals, but the need to resolve legacy issues makes it uncertain as to when these will occur.”
There had been speculation Mr Hammond could take advantage of the expected profits announcement to offload shares.
In April Mr Hammond said he was willing to sell the stake at a loss in order to draw a line under the post-crisis years. At current prices RBS shares are worth around half of the £5.02 a share level the Government bought them for in 2008.
A Treasury spokesperson added: “There is still work to do but RBS is continuing to implement its strategy and is making good progress in dealing with the problems of the past.”
RBS was boosted last month by European regulators’ blessing that it can keep the 316-branch business Williams & Glyn in exchange for stumping up £775m in small banks support.
Costs are down more than 4pc as restructuring continues, with £490m of cost stripped out in the first half, towards a target of £750m for the year. It has so far closed 81 subsidiaries, cut 3,000 desks and ditched 7,000 systems or applications.
Mr McEwan said a rise in mobile banking was reducing costs, with 58 people every second using its apps and a 13pc increase in users.
The bank is on track to meet financial targets for this year and 2020.
By Iain Withers