US sub-prime deal set to upstage first RBS profits

The banks' first-quarter reporting season strides centre-stage this week, with Royal Bank of Scotland set to post flat underlying profits after striking a bottom-line annual profit in 2017 for the first time in a decade.

RBS boss Ross McEwan is likely to be grilled on the bank's controversial branch-closing policy. Picture: Ian Rutherford

UBS analysts forecast an unchanged adjusted profit of £1.3 billion for the three months to end-March. But the impending settlement with the US Department of Justice over sub-prime mortgage securities’ mis-selling looks set to overshadow the published numbers on Friday.

RBS, still 72 per cent owned by the taxpayer, has yet to reach a multi‑billion-dollar settlement with the DOJ over claims that it mis-sold mortgage-backed securities in the run-up to the financial crisis.

Such a penalty could tumble the lender back into the red again this year. RBS boss Ross McEwan is also likely to be grilled on the bank’s continuing controversial branch-closing policy, and for any further developments in an extensive redundancy programme.

Graham Spooner, Investment Research Analyst at The Share Centre, said: “Investors will be keeping a close eye on costs, along with any updates on the CEO’s ongoing restructuring plans.

“Analysts have been turning more positive on the group, with the first profit in nine years reported in February, but this has yet to be reflected in the share price this year which is down by around 4 per cent.”

The government said last year that plans to reprivatise RBS were under way, with the aim of selling £15bn of its shares by 2023.

It wants to restart share sales in RBS by the end of the 2018-19 financial year and sell off £3bn a year over five years – about two-thirds of its stake.