News Column

RBS half-year profits highest since 2008

July 26, 2014

Jill Treanor

Royal Bank of Scotland yesterday reported its highest first-half profits since its 2008 taxpayer bailout, surprising the City and sparking a sharp rise in share price.

The 10% rise in the shares - adding pounds 3bn to the value of the taxpayer's stake - took place after it was forced to issue its figures a week early because of the bigger than expected improvement in profits to pounds 2.6bn for the first six months of the year.

A year ago, when Ross McEwan was named as chief executive, the bank had reported a pounds 1.3bn profit. But even as the new boss hailed the steady progress , he issued a cautionary note.

"Let me sound a note of caution. We are actively managing down a slate of significant legacy issues that will likely hit profits going forward."

RBS put aside a further pounds 150m to cover the cost of payment protection insurance claims and also faces potential bills from other issues such as legal action brought by investors relating to a cash call it conducted in 2008, just before its bailout.

Despite the rise in the share price to 360p, it is less than the 500p at which the taxpayer pumped in pounds 45bn to prevent the bank from collapsing during the 2008 crisis.

Another sign of the improving conditions was the move by the bank - the first in more than a decade - to write back provisions made for bad loans.

Sir Philip Hampton, the bank's chairman, said: "It is fair to say there is something of an element of a tipping point in these figures as it shifts a little bit more away from a banking dominated by stories of distress . . . toward a bank with a focus on capabilities of the business."

An impressive pounds 1.8bn fall in losses on bad debts to pounds 269m fuelled the profit rise.

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Source: Guardian (UK)

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