RBS reported: 0.43 p . 83 percent nationalized ;core business is profitable . Date: Friday 06 May 2011
LONDON (ShareCast) - Part-nationalised lender Royal Bank of Scotland made an underlying operating profit of more than £1bn in the first quarter but, unlike its sector peer Lloyds on Thursday, it has not made any provision for claims relating to mis-selling of payment protection insurance (PPI)'
“RBS continues to settle [PPI] claims where we believe that the customer has not been treated fairly or has suffered some detriment. However, a decision on appeal of the court case, led by the BBA [British Banking Association], has not yet been made as it relates to important other issues of retrospective regulation. The uncertainties around the outcome of the PPI action mean that, at this time, the group is unable reliably to estimate any potential financial liability, although it could prove to be material,” the group said.
RBS made an underlying first quarter operating profit of £1.05bn, up from £882m the year before.
Total income declined to £7.55bn from £8.21bn the year before, as market conditions were not so favourable this time round for the group's investment banking arm, Global Banking and Markets (GBM).
Impairments continued on a downward trajectory, falling 9% compared with the prior quarter to £1.95bn and 27% compared with the first quarter of 2010. Non-core impairments were 11% lower, reflecting the improving corporate environment, but with continued high impairment levels in Ireland. Core impairments also fell, with improvements in UK Retail and UK Corporate more than offsetting higher Ulster Bank impairments.
The group balance sheet continued to strengthen. Non-core third party assets (excluding derivatives) declined by £13bn during the quarter to £125bn, and the division remains on track to hit year-end targets.
The group loan:deposit ratio improved to 115%, driven largely by the continued deleveraging of the Non-Core division. Long-term issuance was £10bn in the quarter relative to a full year target of £20bn. The liquidity portfolio of £151bn remains in line with the group's target level.
The group's Core Tier 1 ratio, a key measure of balance sheet strength, improved by half a percentage point during the quarter to 11.2%. Gross risk-weighted assets, excluding the relief provided by the government's Asset Protection Scheme (APS), fell by £33bn to £538bn.
Loss before tax was £116m compared to £5m a year earlier, after a £480m write-down in the value of the group's own debt (Q1 2010: £169m) and a £469m (Q1 2010: £500m) hit relating to fair value changes in the group's APS involvement.
The loss attributable to shareholders widened to £528m from £248m.
“Core Retail & Commercial demonstrated continued momentum, reflecting both improving economic conditions and positive results from investment programmes, while GBM benefit......"
