Royal Bank of Scotland shares soared by 14 per cent in early trade as it surprised the market with a sharp rise in profits.
The bank’s value leapt by £3 billion after it revealed its half-year profits nearly doubled to £2.65bn. It issued its half-year figures early because they were far better than the market was expected. It attributed the turnaround to an improvement in the economy allowing it to write back some expected losses on bad loans as a gain.
The figure was far ahead of analysts’ expectations, though it is unlikely to prompt an early sell-off of the government’s 81 per cent stake in the bank. Shares hit 376p, their biggest one day gain since Apruil 2009, but remain 25 per cent below what Treasury paid for them in the rescue of the bank in 2008 and 2009.
In a conference call with the media this morning chief executive Ross McEwan said the improvement in the bank’s performance was down to the upturn in the economy.
“We made a decision to go early because we are so far away from the consensus figures,” he said.
“Once we realised the numbers were emerging in a positive way our view was to get as much detail out into the market place.”
McEwan said the bank was taling to regulators in relation to the independence issue but added: “We have made it clear we are staying out of the debate. The matter is for the Scottish people.”
RBS said the profit this time allowed it to write back losses that had been booked on bad loans, giving it a benefit of £93m compared with £1.1bn of impairments in the second quarter of last year and expectations from analysts that
it would book impairments of about 500 million pounds.
There was an operating profit of £1.3bn pounds in the second quarter, up from £174 million 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.