LONDON (Reuters) - Royal Bank of Scotland
posted a surprise 1 billion pound ($1.7 billion) pretax profit for
the second quarter thanks to a turnaround in losses from bad loans,
prompting it to release earnings a week early.
The numbers far exceeded analysts' expectations for the bank that is
81 percent owned by the British government after being bailed out
during the 2008/09 financial crisis.
It sent RBS shares soaring by 14 percent to 376 pence, on course for
their biggest one-day gain since April 2009 and boosting chances of
the taxpayer recouping what it invested - though maybe not for
several more years because the price is still 25 percent below what
the state paid.
RBS said the profit was mainly because of an economic upturn that
allowed it to write back losses that had been booked on bad loans,
giving it a net release of 93 million pounds.
That compared with 1.1 billion pounds of impairments in the second
quarter of last year and expectations from analysts that it would
book impairments of about 500 million pounds.
The bank made an operating profit of 1.3 billion pounds in the
second quarter, up from 174 million pounds a year ago. Its 1.01
billion pound pretax profit was in contrast to expectations that it
would post a small loss, based on analyst forecasts compiled by the
company.
'STRONGER BANK'
RBS said it was obliged to release headline numbers early because
they were far better than market expectations. It will release full
results on Aug. 1.
Chief Executive Ross McEwan, who took the helm in October 2013, said
the results showed the steady progress being made to make RBS "a
much simpler, smaller and fairer bank".
"These results show that underneath all the noise and huge
restructuring of recent years, RBS is a fundamentally stronger bank
that can deliver good results for customers and shareholders,"
McEwan said.
The also increased the amount it set aside to compensate customers
for mis-selling payment protection insurance and interest rate swaps
by 250 million pounds, and McEwan said the bank still has to tackle
a number of problems from its past.
"This includes significant conduct and litigation issues that will
hit our profits in the months and years to come," he warned. "I’m
pleased we’ve had two good quarters, but no one should get ahead of
themselves here – there are bumps in the road ahead of us."
The stronger results also lifted the bank's core capital ratio to
10.1 percent at the end of June, up from 9.4 percent three months
earlier.
(Additional reporting by Simon Jessop; Editing by David Goodman)
