IT WAS more of the same from Royal Bank of Scotland yesterday. The bank has almost patented the curate’s egg description in the past few years: good in parts. The underlying profits recovery continues at the taxpayer-backed bank.
But the major restructuring and legacy costs as it becomes a simpler and cleaner bank also continue, meaning the bottom-line performance fluctuates.
In the first six months of this year RBS fell into losses again, but underlying profits were up 27 per cent in a better second quarter to June. It is not the first time in the group’s toiling recovery after the financial crash that we have seen this decent underlying picture.
RBS chief executive Ross McEwan is surely right that there is a decent franchise down there when you can dig away all the litigation and restructuring cordite.
Chancellor George Osborne has already indicated he wants the 78 per cent taxpayer stake in the bank to start being sold down sooner rather than later, with the process expected to be kickstarted within the next few months.
Despite the headline losses at RBS, there is little in the bank’s latest underlying trading performance to derail that process. Even more so given that the Chancellor is clearly now phlegmatic about taking a loss on the stake if necessary to get the RBS monkey off the government’s back by the end of this parliament.
RBS indicated yesterday that it may still be a couple of years before its financial strength is established and sustainable enough to consider paying a dividend.
This sounds about right. Lloyds, the other taxpayer-backed bank, persuaded the authorities to allow it to restore a divi after a similarly extended freeze following the financial crash and state bailout. But, as McEwan notes, that bank is about two years further down the line in terms of financial strength. Nothing would be worse than a premature restoration of the RBS divi that could not be sustained.
RBS’s outgoing chairman Sir Philip Hampton said yesterday that in the wake of the crash many people, including him when he came on board, under-appreciated the state the bank was in.
It is a long, incremental haul. But progress is being made.