UPDATE 2 — Shares of Royal Bank of Scotland jumped 5% on Friday after it reported a first quarter attributable profit of £259 million, its first quarterly profit since September 2015.
In its outlook, RBS said that it expected to be profitable in 2018, subject to providing fully for its remaining significant legacy issues in 2017.
The Edinburgh-based bank said its first quarter adjusted income of £3.239 billion was £425 million or 15.1% higher than the same period in 2016.
RBS said that across its personal and business banking (PBB), commercial and private banking (CPB) and NatWest Markets (NWM) businesses, it reported an adjusted operating profit of £1.3 billion, an increase of £303 million or 30% compared with the same quarter in 2016.
RBS added: “We anticipate that adjusted operating profit will be lower in Q2 2017 compared with Q1 2017 reflecting expected reduced income in NatWest Markets, coupled with increased adjusted operating expenses …”
UK chancellor Philip Hammond has conceded that the British government may be forced to sell the UK taxpayer’s stake in Royal Bank of Scotland (RBS) at a loss.
The UK government bought its roughly 72% stake in RBS for about £45.5 billion in 2008 — at £5.02 a share — as part of a state bailout at the height of the financial crisis.
Shares in RBS rose 5% to around £2.67 on Friday.
Laith Khalaf, analyst at Hargreaves Lansdown, said: “It’s too early to pop the champagne corks though, because the US Department of Justice is likely to play the role of party pooper at some point, by landing RBS with a massive fine.
“The ongoing saga of the Williams & Glyn separation is still rumbling on too, and whatever the conclusion, it could end up costing RBS more money.
“These longstanding problems aside, this could be the year when RBS finally starts to look a bit more like a swan, rather than an ugly duckling.”
RBS CEO Ross McEwan said: “We’re pleased to post a bottom line profit of £259 million for Q1.
“These results reflect very much what we talked about at full year.
“Firstly, a strong and improving core bank and secondly, fewer remaining legacy issues.
“Core income is up on last year, adjusted costs are down, and we’re making better use of capital.
“These drive a 13.8% adjusted return on equity, an improving productivity in the core bank, and are important steps on our path to profitability.
“Our six core businesses made an adjusted operating profit of £1.3 billion in Q1.
“RBS has now averaged an adjusted core operating profit of over £1 billion for the last nine quarters.
“This bank has a very strong core with great potential, and we believe that by going further on cost reduction and faster on digital transformation – we will deliver a simpler, safer and even more customer-focused bank, with a compelling investment case.”