RBS Confirms 92% Profits Boost A Week Early
Shares surged in Royal Bank of Scotland (RBS) on Friday after it confirmed a 92% rise in half-year pre-tax profits to £2.7bn, despite further writedowns for past mistakes.
The bank, which remains 81%-owned by the taxpayer following its bailout during the financial crisis, brought forward its results by a week saying they were "significantly stronger" than the market had been expecting.
The RBS share price rose 14% in early trading - adding £3bn to its value - when the FTSE 100 opened for business on news of the profit performance.
The bank said the better results came as economic improvements in the UK and Ireland fed through to its bottom line while it was also running down bad assets more quickly.
On a separate operating profit basis, a rise of 267% was recorded compared to the same period last year.
However, it made an additional provision of £150m for the costs associated with the mis-selling of payment protection insurance (PPI), taking the total to date to £3.25bn.
RBS also set aside £100m more for the mis-selling of interest rate swaps - taking the total to £1.3bn.
Its chief executive, Ross McEwan, has previously warned that the bank may face additional charges in future arising from regulatory investigations into activities including foreign exchange rigging.
This follows fines for previous mistakes such as the manipulation of the Libor inter-bank lending rate and money laundering.
Mr McEwan said: "The results we are posting today show the steady progress we are making as we take the steps to be 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.
"There is progress on all of our key priorities - capital is stronger, costs are lower and customer activity is gradually improving - although we have only just started with our programme to make it easier for customers to do more business with us.
"But let me sound a note of caution. We are actively managing down a slate of significant legacy issues.
"This includes significant conduct and litigation issues that will hit our profits in the months and years to come.
"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.
"Today's results are pleasing but no one at this bank is complacent about the challenges ahead."
In an interview with Sky News, Mr McEwan said its profit growth was attributable to both the economic recovery and the lender's efforts to turn around its fortunes.
"The economy has been improving. It's moved through from being a consumer-led recovery now into small and medium-sized businesses.
"Our growth in that market, of new business, is up 31% this half over the last."