LONDON – Royal Bank of Scotland Group PLC posted a bigger-than-expected net profit in the first quarter and said it is still on track for a full-year profit next year.
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RBS has posted nine years of consecutive annual losses since being bailed out by the U.K. government in the financial crisis, with only a few profitable quarters along the way.
Net profit in the first three months of 2017 was GBP259 million ($334.2 million), compared with a GBP968 million net loss in the first quarter of 2016 and much higher than analyst expectations of around GBP50 million.
The bank's core operations, stripping out units and assets it is shedding, made GBP1.33 billion in pretax profit, up 30% on the first quarter of 2016, mainly because of better conditions for client trading in its shrunken markets business. It also grew its loan book as continued low interest rates helped lift mortgage lending.
The U.K. government owns around 70% of RBS after bailouts of the bank in 2008 and 2009. Treasury chief Philip Hammond said last week the government may have to sell the shares for less than the GBP45.5 billion it invested. The bank's entire market capitalization is currently around GBP30 billion.
Chief Executive Ross McEwan told reporters on a call "the price paid in was the price of the day" when the government made the capital injection. "A lot happened since then."
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He said it is up to the government to decide when to start selling its shares but that the bank needs to get past two major issues.
The biggest hump to get over is a settlement with U.S. authorities over its role in the sale of toxic mortgage-backed securities before the financial crisis. RBS has set aside $8.3 billion for potential penalties and Mr. McEwan said Friday he's confident of a conclusion of the matter this year.
The bank also needs European Commission approval of a plan to keep 300 branches it was meant to sell under a 2009 state aid agreement. After a string of setbacks trying to sell the branches, RBS proposed finding other ways to move small business customers off its books and promoting banking competition.
The U.K. government submitted an alternate plan to the European Commission that is now under review.
Write to Margot Patrick at firstname.lastname@example.org
(END) Dow Jones Newswires
April 28, 2017 05:58 ET (09:58 GMT)