RBS back in profit for first time in three years

Published on Friday 6 August 2010 09:22

THE Royal Bank of Scotland scraped into the black today with profits of £9 million for the first half of 2010.

At the pre-tax level the bank went from a 296m loss to a 1.1bn profit.

The bank, which is 83% taxpayer-owned, was helped by improving bad debt losses as it moved from a 248 million loss in the first quarter to a 257 million profit between April and June.

Chief executive Stephen Hester said the turnaround of the business is on track, but added: "The rebuilding of RBS is a marathon not a sprint."

RBS is the last of the UK's "big four" banks to report results this week, with profits from the quartet totalling more than 12 billion.

The part-nationalised bank's retail banking arm – which owns NatWest and now has 12.9 million current accounts – boosted operating profits to 416 million during the first half, helped by wider margins on lending.

The group's net interest margin – the gap between what it pays in interest and what it charges in loans – rose to 3.77% from 3.57% a year earlier at its retail arm. Bad debt losses fell to 687 million from 824 million in the first half of last year.

"Widening asset margins across all products and an increasing number of mortgage customers choosing to remain on standard variable rate were the key drivers," the bank said.

The bank said it remains on track to meet its 8 billion mortgage lending target for the year to February 2011, although RBS saw signs of weakness in the second quarter with a 21% fall in application volumes.

The group lent a gross 12.7 billion to businesses between April and June – 27% above a year earlier – but the bank added that "overall activity levels remain somewhat subdued", with many businesses looking to cut debt and paying back a net 1.4 billion over the quarter.

The group's investment banking arm had a "more difficult" quarter thanks to the sovereign debt crisis which struck markets in April.

Revenues dipped 31% between April and June after a strong first quarter and operating profits fell to 2.5 billion over the first half of 2010, down 44% on a year earlier.