RBS swings to profit in third quarter
Royal Bank of Scotland said on Friday that it swung to a profit in the third quarter as restructuring and conduct costs fell.
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In the three months to 30 September, the bank made a profit of £392m versus a loss of £469m in the same period a year ago, but down from a profit of £680m in the second quarter. For the year to date, RBS made a profit of £1.3bn.
The company said that subject to any further provisions for the investigations of the US Department of Justice into the group's historic residential mortgage-backed securities related activities being substantially taken in 2017, it still expects to be profitable in 2018.
On Thursday, RBS agreed to pay more than $44m to settle US charges that some of its traders had defrauded customers on bond prices.
RBS said on Friday that across the core businesses, adjusted operating expenses have fallen by £231m for the year to date, representing 33% of the £708m reduction achieved across the bank. Meanwhile, conduct costs fell to £125m from £425m a year ago and the company made no further provisions for the misspelling of payment protection insurance. Restructuring costs dropped to £244m from £469 a year ago.
Chief executive Ross McEwan said: "Our strategy to deliver a simpler, safer, customer-focused bank, is working.
"We have grown income, reduced costs, made better use of our capital and continued to make progress on our legacy conduct issues.
Our core bank continues to generate strong profits and we remain on track to hit our financial targets."
Ian Forrest, investment research analyst at The Share Centre, said: “Investors should appreciate that management expect the bank to achieve full-year profitability next year, for the first time since 2007, and some key measures such as the cost-income ratio and capital reserves are certainly moving in the right direction to achieve this.
“These are good results from RBS today, beating market expectations, and some of the large legacy issues in the US have been settled...The group has outperformed the market so far this year but the large fine from the Department of Justice remains to be resolved and the UK government is unlikely to begin selling down its 71% stake in the bank until that’s done."
At 1015 BST, the shares were up 0.6% to 282.80p.
“We would still suggest that investors avoid the stock, as there are better opportunities to be had in the market. For investors interested in this sector, our preference is HSBC as it has remained a significant payer in difficult times and now there are clear indications that the group is starting to benefit from its restructuring programme.”