Recovering Royal Bank of Scotland doubles profits
London — State-rescued Royal Bank of Scotland (RBS) more than doubled net profits in 2018, the lender announced on Friday as it extends its recovery following a decade of turmoil.
RBS said in a statement that profit after tax jumped to £1.62bn last year. This compared with £752m in 2017, which had been the Edinburgh-based lender’s first annual net profit following the global financial crisis.
RBS, saved at the height of the crisis in 2008 by the UK government in the world’s biggest banking bailout, built on its recovery last year thanks to lower costs and an improved trading performance, its earnings statement showed.
“2018 was a year of strong progress on our strategy — we settled our remaining major legacy issues, paid our first dividend in 10 years and delivered another full-year bottom line profit,” CEO Ross McEwan said on Friday.
“Our financial performance is good, given the uncertain economic outlook,” McEwan said while noting that “the UK economy faces a heightened level of uncertainty related to the ongoing Brexit negotiations”.
In October, RBS said it had set aside an additional £100m to cover bad loans, “reflecting the more uncertain economic outlook” that analysts said referred to Britain’s looming exit from the EU.
The bank, like many businesses, is planning for the worst amid increasing worries that Britain will crash out of the EU on March 29 without a deal.
“Resolution is required,” New Zealand national McEwan told the BBC on Friday. “The longer this drags on, the harder it is for business to invest and it does impact on everyday people.”
Following the earnings update, the share price of RBS was down 0.8% at 239p on London’s FTSE 100 index, which edged up 0.1% overall.
“RBS delivered a stellar set of numbers and a forecast-beating dividend payout to investors, but Brexit and other factors mean it will fall short on its cost-cutting target,” noted Neil Wilson, chief market analyst at Markets.com. “Costs continue to come down ... meaning that the bank has reduced operating costs by £4bn in the past five years.”
RBS remains majority-owned by the British government after it was saved with £45.5bn of taxpayers’ cash in 2008.
In June, Britain resumed privatisation of RBS and the Conservative government led by Prime Minister Theresa May is seeking to sell two thirds of its stake for roughly £15bn over a five-year period — but at a big loss.
RBS has, meanwhile, previously been fined $4.9bn by the US justice department over its role in the sub-prime housing crisis that sparked the 2008 meltdown.
Following the latest results, Laith Khalaf, senior analyst at Hargreaves Lansdown, said, “Restructuring costs and misconduct charges are disappearing in the rear-view mirror, while rising profits, combined with a nice dividend, will be applauded by shareholders.”