The markets certainly seem to agree that the results show progress, with RBS shares up some 3%. But there are an awful lot of variables to be taken into consideration, so, in many ways, it’s a case of whether you prefer a glass half-empty or glass half-full approach.
For starters, there’s a total of £1.9bn of bad debt charges muddying the waters. Including a £1.3bn impairment on its exposure to the tanking Irish property market. Although, unlike Lloyds earlier in the week, RBS thinks that property prices in the Emerald Isle have bottomed out and doesn’t expect to have to make any further provision.
Then, there’s another £469m payment made to the Asset Protection Scheme, part of the taxpayer bailout package. And, perhaps most oddly of all, a £480m charge for the rising cost of its own debt. This is worth a closer look as it is a rather unexpected consequence of rising market confidence. What has happened is that the market view of RBS’s performance has improved, making its debt a more attractive prospect and thus pushing the price of its bonds up. Consequently it would now cost the bank more – £469m more to be precise – to buy back its debt than it would have done at the same time last year. Got that? Good.
And, looming over RBS as over the other high street banks, is the prospect of a big charge to pay for mis-sold payment protection insurance. RBS has made no provision for this as yet, saying that it’s impossible to estimate the size of any liability, at least until the Appeal Court ruling is in. Commenting on Lloyds' decision to take a £3.2bn charge on PPI, Hester said: ‘The legal analysis has not changed. The courts won’t pay attention to whether Lloyds has caved or not caved.’
So all in all a pretty complex picture. But beneath it all there are, as Hester says, encouraging signs. Perhaps most significant is that much of the bad news is generated by ‘legacy issues’ – non-core assets of which the bank is disposing – and much of the good news is generated by core assets which are performing reasonably well.
So what does it mean for taxpayers' chances of getting their money back, or even turning a profit on the deal? Don’t hold your breath. Privatisation has probably edged a little nearer as a consequence of these figures, but there’s still a way to go yet.