RBS shares on a high as it stays in the black | City & Business | FinanceHeat Profit
But a 10th consecutive annual loss looms as the state-controlled lender braces itself for a multibillion US penalty over toxic bond mis-selling.
RBS, over 70 per cent owned by the UK taxpayer after its £45billion bailout nearly a decade ago, posted a third-quarter profit of £392million compared with a £469million loss a year ago, boosting its profits for the first nine months to £1.33billion.
Litigation and conduct costs fell from £425million to £125million and restructuring costs nearly halved to £244million, while it remained on track to meet its annual cost-saving target of £750million.
Chief executive Ross McEwan, pictured, said: “Our strategy to deliver a simpler, safer, customer-focused bank, is working. We have grown income, reduced costs, made better use of our capital and continued to make progress on our legacy conduct issues.
“Our core bank continues to generate strong profits and we remain on track to hit our financial targets.”
Earlier this year, RBS agreed a £4.2 billion settlement with US regulators over claims that it mis-sold toxic mortgage bonds in the run-up to the financial crash.
It still faces a huge payout in a Department of Justice Investigation and has set aside £6.6 billion to settle claims.
McEwan is hopeful a settlement will be reached this year with the DoJ and indicated that the removal of this uncertainty could provide the Government with an opportunity to start selling down its stake.
RBS shares rose 4¾p to 285¾p.
Laith Khalaf, senior analyst at Investment firm Hargreaves Lansdown, said: “The fact the bank has said it expects to be profitable next year suggests RBS is bracing for a pretty imminent rap on the knuckles.
The large and unpredictable nature of this liability looms large over RBS and could hamper its ability to pass the Bank of England’s 2017 stress test.
“The core retail bank within RBS is performing pretty well.”