Royal Bank of Scotland reports £2bn pre-tax profit
- 4 November 2011
- From the section Business
Royal Bank of Scotland made pre-tax profits of £2bn in the three months to 30 September, against a £1.6bn loss in the same period last year.
In a statement, RBS said that its retail operation was "holding up well", but that the investment bank side was "only modestly profitable".
Bailed-out RBS warned of further job losses, and said the global economic slowdown was delaying its recovery.
RBS took more writedowns of £142m on its exposure to Greece in the quarter.
The bank also said it had cut its holdings of sovereign debt from Portugal, Italy, the Irish Republic, Greece and Spain to £772m at the end of September, from £4bn at the start of the year. The bulk of these sales were made during the third quarter.
"RBS's third quarter results show the improved strength and resilience we have built up since 2008," said chief executive Stephen Hester.
"They also highlight the external pressures facing banks, and economies more broadly, which are making the road to recovery longer and bumpier than hoped for," he added.
Retail banking revenues were steady at £4.1bn, but bad debt charges were cut to £1.5bn, down £728m on the previous quarter.
Stock market turbulence saw income at its investment arm, Global Banking and Markets, fall 29% to £1.1bn during the quarter.
The third-quarter profits compare with a £678m loss in the second quarter of 2011. For the first nine months of the year RBS made pre-tax profits of £1.2bn.
The £2bn pre-tax profit was achieved only after accounting gains of £2.36bn on fluctuations in the value of its own debt.
The operating profit in core operations was £1.26bn, down from £1.68bn in the second quarter and £1.73bn in the third quarter of last year.
RBS shares have fallen by nearly 50% over the past year, but rose as much as 5% on Friday.
Mr Hester warned of further cost cutting, including an undisclosed number of job losses, as the bank expected to implement the proposals put forward by the Independent Commission on Banking.
These include ringfencing retail operations from the investment arms.
The regulatory changes, combined with the weak outlook for economic growth, will lead to increased focus on its retail division and will require further cost savings, Mr Hester said.
He is halfway through a five-year turnaround plan, which has included halving the size of its investment bank operations. He has previously said 2,000 more jobs could go in the division.
"Forward momentum will be challenging, however, until the economies we serve see stronger growth," Mr Hester said.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The bank remains a work in progress, but is making some headway amidst turbulent conditions.
"There is little doubt that major challenges remain for RBS, not least of which is the torrent of regulation which is heading in the industry's direction."