RBS rings up solid numbers despite PPI hit

Chief executive Ross McEwan - 'good performance'. Picture: Ian Rutherford
Chief executive Ross McEwan - 'good performance'. Picture: Ian Rutherford
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Royal Bank of Scotland has posted a rise in third-quarter profit as the group continues on the road to recovery, despite being stung by £200 million in PPI payouts.

The lender, which remains 62 per cent owned by the taxpayer, posted a 14 per cent increase in profits to £448m for the three months to 30 September.

Pre-tax operating profit was up 10 per cent to £961m but RBS also booked £200m in provisions to cover costs for the mis-selling of payment protection insurance (PPI) in the period.

It reflects higher-than-predicted complaints volumes following a Financial Conduct Authority advertising campaign featuring Arnold Schwarzenegger aimed at encouraging people to come forward before an August 2019 deadline for final claims.

RBS has made provisions totalling £5.3 billion to date for PPI claims.

In total RBS detailed £389m in third-quarter conduct and litigation costs.

Chief executive Ross McEwan said: “This is a good performance, set against a highly competitive market and an uncertain economic outlook.

“We are growing lending in our target markets and are in a strong position to support the economy. We’re aware there is much more work to do and are fully focused on improving for our customers.”

RBS also said that it has secured approval from Dutch regulators to serve EU clients out of Amsterdam post-Brexit.

RBS also took a £240m impairment charge, including £100m to reflect the “more uncertain economic outlook” in Britain.

However, referring to Brexit, McEwan said that in a recent call with the Prime Minister the lender sensed a “more optimistic tone” than in the past.

Shore Capital analyst Gary Greenwood said the bank had published a “strong set of Q3 results”.

He added: “With the resolution of major legacy issues now completed we think that the investment case for RBS has become much clearer. This, combined with recent share price weakness, has created a better entry point.

“With 26 per cent upside to our fair value of 295p, we reiterate our ‘buy’ stance. That said, we continue to see even better value elsewhere amongst the domestic UK banks, notably Lloyds Banking Group and Barclays.”

Earlier this month, RBS paid out its first dividend in ten years after reaching a long-awaited $4.9bn (£3.7bn) settlement with US regulators over claims that it mis-sold mortgages in the run-up to the financial crisis.

It was considered the largest of a string of legacy issues that the bank is starting to put to rest a decade on from its bailout in 2008.