High hopes for RBS as it tries to ditch dark legacy

Investors in Royal Bank of Scotland will be looking for evidence that the group's turnaround is gaining momentum when it posts an expected strong rise in third-quarter profits this week.

Earlier this month RBS chief Ross McEwan announced the lender would pay its first dividend in almost a decade. PIcture: Ian Rutherford

The banking giant’s figures for the second quarter were hit by further provisions in respect of issues related to the financial crisis, but analysts have pencilled in a rise in attributable profits to £507 million for the three months to September, up from £392m a year earlier.

Michael Hewson, chief market analyst at CMC Markets UK, said that with legacy issues now largely behind it, the latest numbers “could well be the first time we get a clear look at the bank’s profit potential without the noise of exceptional items”.

“Having returned to profit last year as well as finally drawing a line under its dispute with the US Department of Justice, the bailed-out bank now needs to show that its underlying business model can still deliver a return in a UK economy that appears to have had a decent last six months,” he said.

Earlier this month, the lender paid its first dividend in almost a decade and Graham Spooner at The Share Centre said long-suffering investors will be hoping that Friday’s update will not derail hopes of more payouts.

“Other areas to concentrate on will be costs and any further delays to the restructuring timetable,” he added.

Lloyds will also update on trading a day before RBS, and Nicholas Hyett at Hargreaves Lansdown said: “With Brexit raising questions about the longer-term health of the British economy, we’ll be keeping a close eye on bad loans.”