RBS Posts First Half-Year Profit in Three Years -- Update
August 04 2017 - 3:45AM
Dow Jones News
By Max Colchester
The Royal Bank of Scotland Group PLC swung to a net profit for
the first half of 2017, as a series of one-off costs melted
away.
The 71% U.K. state-owned bank said Friday that revenue came in
at GBP6.91 billion, compared with GBP6.06 billion ($7.96 billion)
the year before, on the back of stronger mortgage lending and
returns from its investment banking division. The bank made a net
profit of GBP939 million, versus a GBP2.05 billion loss in the
first half of 2016, when the bank paid the British government over
GBP1 billion to regain the right to pay dividends. This was its
first half-year profit in three years.
The bank said restructuring costs continued to rise in the first
six months of 2017, as it pursues a multiyear turnaround to shed
businesses and refocus on the U.K.
Litigation costs came in at GBP400 million, as the bank paid to
settle disputes with U.S. authorities and a class action by
shareholders.
Despite improving returns, the lender will likely make its ninth
consecutive full-year loss in 2017, hit by costs linked to fines
and winding down its "bad" bank. However, Chief Executive Officer
Ross McEwan said the bank was "clear and closer" to making a
profit, which it aims to do on a full-year basis in 2018, a decade
after its taxpayer bailout.
In recent months, the bank has made strides to clean up some of
the legacy issues hanging over it. In July, it agreed to pay $5.5
billion to the U.S. Federal Housing Finance Agency to settle a
probe into its sale of toxic mortgage-backed securities in the run
up to the global financial crisis. The bank also reached a
preliminary agreement with the European Commission to spend over $1
billion to boost competition in the U.K. The deal came after RBS
was found in breach of European competition rules following its
bailout.
Three major hurdles remain before the bank returns cash to
shareholders: RBS needs to convincingly pass a balance sheet stress
test; it needs to settle criminal and civil investigations with the
U.S. Justice Department over its role in packaging subprime
mortgages and it needs to make a profit. The bank says it still
hasn't had any update from the Justice Department on when a
settlement might come.
The lender also said Friday that it would repurpose its Dutch
banking license so that its investment banking division could
service customers on the continent after Brexit. The bank expects
less than 150 roles to move overseas. The cost of the move will be
in the low tens of millions of pounds.
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
August 04, 2017 03:30 ET (07:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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