RBS up $0.93 over $14.00s nw. 0.43 pound in london..New quarterly report up: Core business remain profitable. mis selling of insurance is less of an issue than LLOYD's.
UPDATE 4-RBS core profit jump offsets Irish losses
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Royal Bank of Scotland Group PLC
RBS.L
43.14p
+2.66+6.57%
11:24am EDT
Lloyds Banking Group PLC
LLOY.L
54.14p
+0.76+1.42%
11:24am EDT
Bank of America Corp
BAC.N
$12.44
+0.14+1.14%
11:24am EDT
Fri May 6, 2011 7:21am EDT
* Profits rise at RBS' core business
* Group attributable loss of 528 mln stg
* Too early for estimate on PPI insurance claims impact
* Remains unsure of timing on FSA probe into RBS
* Shares up over 6 pct, recovering from previous day's fall
(Adds further comment, detail, updates share price)
By Sudip Kar-Gupta
LONDON, May 6 (Reuters) - Royal Bank of Scotland (RBS.L) said profits were improving at its core business and hefty Irish loan losses would start to decline in the second half of the year, sending its shares higher.
RBS, 83-percent owned by the UK government following its bail-out during the credit crisis, had a first quarter group loss of 528 million pounds ($841.5 million) as the company racked up 1.3 billion pounds in bad debts at Ulster Bank.
But profits at its core business - namely its main retail and investment banking arms and excluding businesses due to be sold off - rose 25 percent from the final quarter of 2010 to 2.1 billion pounds, with profit margins also increasing.
"RBS is pulling off the recovery that we have targeted," Chief Executive Stephen Hester said on a conference call.
RBS shares were up 6.4 percent at 43.06 pence in early afternoon trade.
"Things are improving, albeit at a slowish rate," said Cavendish Asset Management fund manager Paul Mumford, who holds 3.75 million RBS shares.
Customers at RBS' Ulster Bank are struggling to pay back loans given tough economic conditions in Ireland. However, the total charge for bad debts -- 1.95 billion pounds -- fell 9 percent from the final quarter of 2010.
RBS said Irish loan losses would stay high this quarter before "gradually declining" in the second half of the year.
PROBLEMS AHEAD?
The bank faces other hurdles along its path to recovery.
The industry in Britain was rattled this week by Lloyds' (LLOY.L) shock 3.2 billion-pound charge to cover compensation for people sold insurance they could never claim or did not know they were buying. [ID:nLDE7432FG]
Lloyds' provision was made for payment protection insurance (PPI) complaints after banks lost a UK court case on the way policies were sold to millions of customers. The policies were typically taken out alongside a personal loan or mortgage to cover repayments if customers fell ill or lost their jobs [ID:nLDE73J18Y].
Bank of America (BAC.N) has also raised its provision for the insurance mis-selling to $650 million from an original $592 million.
RBS said the impact from settling these insurance claims could be "material" but it was too early to provide an estimate.
Analysts at Deutsche Bank and Exane BNP Paribas analysts said RBS could face a 1 billion pound hit because it has a roughly 10 percent market share in that sector. In total they said the PPI mis-selling debacle could cost British banks 8 billion pounds overall.
However, Berenberg Bank analyst Alexander Potter said the insurance mis-selling provision was less of an issue for RBS than for Lloyds, due to RBS' bigger size.
"A one billion pound hit on a group with a market capitalisation of some 44 billion pounds is relatively modest," he said. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For BreakingViews on insurance mis-selling: [ID:nLDE7440JI] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Also around the corner is a report by the Financial Services Authority (FSA) regulator into RBS' near-failure, which required the government to pump in 45 billion pounds.
Legal complications have held up publication of the report but on Thursday Britain appointed two senior corporate governance experts to ensure it will not be glossed over or stymied by legal rows. [ID:nLDE7441JL]
CEO Hester said the company remained keen for the report, which is being examined by its lawyers, to be published.
"We think it would be a good thing if a report is published, as there's a risk that people think there's some smoking gun. If there is, we haven't found it," Hester said.
Britain hopes to eventually sell off its RBS and Lloyds shares, but Hester said any disposal of the UK's RBS stake could remain some way off.
"I don't believe (the government), is preparing anything with a definitive eye....We've had no conversations with investors, specifically, with this in mind," he added.
($1=.6274 Pound)
