It’s not every day you hear good news from RBS. Today, however, is one of those days, as the bank reported first quarter pre-tax profits doubled to £1.64bn.
Investors were falling over themselves to get their mitts on the company’s shares, sending the price up by as much as 16% to 347p, although it had settled down at around 329p by midday. No wonder – eight City analysts surveyed by RBS had predicted profits of just £200m.
The bank’s share price has been more volatile than Jeremy Clarkson at a diversity conference over the past year: today’s rise means it’s back above where it was this time 12 months ago. Today’s results reflect last November’s decision to create an internal ‘bad bank’ to fence off RBS’ riskiest assets, so as long as no more PPI/Libor/bad mortgage scandals are lurking in the closet the shares could actually settle down somewhat.
Source: Yahoo Finance
The lender’s Irish arm also reported profits of £17m in the quarter to the end of March, its first since the financial crisis hit and a big rebound from the £104m loss it recorded a year ago. Meanwhile, RBS’ impairment losses (from writing off bad loans and the like) shrank to £362m compared to a whopping £5.1bn the previous quarter and £1bn a year ago.
However, not all is sunshine and rainbows in Scotland. Investors alleging they were misled over a huge rights issue back in 2008 still want billions from the bank, which said yet another claim had been filed in the High Court this week. As chief exec Ross McEwan put it, ‘we still have a lot of work to do and plenty of issues from the past to reckon with.’
Moreover, fellow bailed-out bank Lloyds is still doing a lot better. The government has been selling down its stake, but is nowhere near to doing the same with RBS, and Lloyds even announced yesterday it wants to start paying a dividend next year. RBS still has a long way to go before it’s back to being a normal bank.