Published: Sat, February 24, 2018
Markets | By Terence Owen

RBS posts its first profit in 10 years

RBS posts its first profit in 10 years

Taxpayer-owned Royal Bank of Scotland has reported its first profit in a decade but warned that its 2018 results may be hit by a pending settlement with US officials.

The bank announced on Friday morning that it had an attributable profit of £752 million in the 2017 financial year, compared to a loss of just less than £7 billion in 2016.

It has been battling to return to profitability since reporting the biggest loss in United Kingdom corporate history in 2008, shortly after the United Kingdom taxpayer money had been used to save the bank from collapse.

RBS shares were down 4.2 percent at 270.2 pence by 1400 GMT on the lack of information about a case which some analysts estimate could mean a charge of up to $12 billion.

The bank's toxic legacy continues to weigh heavily, with a potential fine from the US Department of Justice (DoJ) over the mis-selling of mortgage-backed financial products in the offing.

The gender pay gap "is not where we want to be", RBS Chief Executive Officer Ross McEwan, said. In 2017 our financial strength improved and we continued to put the past behind us.

RBS set aside another £764mln provision in the fourth quarter, including £442mln towards United States mortgage litigation suits from the DoJ and other investigations.

"The timing of the resolution of this issue is not in our control", he said.

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"When it does come, you know, it will have a major impact on our numbers depending its size".

However, despite returning to the black, the lender's shares were down almost 4 per cent making it the top faller in the FTS 100. It needs to resolve the issue before it can return to dividends and pave the way for the government to begin selling its stake.

This has hamstrung McEwan's efforts to rebuild the bank's image and he admitted on Friday that a confidential report into the bank's conduct, recently made public and detailing behaviour by RBS staff, made for "difficult reading".

Ian Forrest, analyst at The Share Centre, added: "The lack of clarity on when the bank might reach a deal with the U.S. authorities over alleged miss-selling of mortgage-backed securities was also noted by some analysts today, along with the fact that the bank made a loss of £583m in the final quarter of 2017". I have the conversations with our staff before I tell any media about that and I'm not changing this year.

The Royal Bank of Scotland Group plc (RBS) is a banking and financial services company.

Commercial & Private Banking reported an adjusted operating profit of GBP1.31 billion, 2.7% higher on 2016 and adjusted return on equity remained broadly stable at 8.2%.

The decline in his 2017 payout was due to a fall in long-term incentive awards calculated on the executive's performance, with his fixed pay and other benefits unchanged. "Two very big shadows still loom over RBS".

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