RBS shares soar as first-half profits double - Business News - Business - The Independent

RBS shares soar as first-half profits double

RBS took investors by surprise by posting stronger than expected interim results

Shares in Royal Bank of Scotland soared in early London trading as the state-backed lender announced first- half profits had almost doubled to £2.6bn.

The bank’s results were originally meant to be published next Friday but its boss Ross McEwan claimed RBS had been forced to release them early because they were “significantly stronger than the market has been expecting”.

RBS said today’s 93 per cent jump in profits had been driven by Britain’s economic recovery with losses on bad debts falling £1.8 billion to £269 million.

However, RBS’s best half-year performance since the financial crisis was laced with warnings as the  group admitted it was forced to set aside an extra £250 million to compensate customers for mis-selling payment protection insurance and interest  rate swaps.

The bank has also been caught up in the Libor and foreign exchange trading scandals.

McEwan added: “Let me sound a note of caution. We are actively managing down a slate of significant legacy issues. This includes significant conduct and litigation issues that will likely hit our profits going forward. “I am pleased we have had two good quarters, but no one should get ahead of themselves here. There are bumps in the road ahead of us.” 

RBS Capital Resolution, its so-called bad bank, also reduced the amount of toxic assets on its books by 28 per cent to £8 billion although total income was down 6 per cent to £9.98 billion.

Other gains included £170 million from the sale of Citizens Illinois branch network and £191 million after offloading its final stake in Direct Line.

The news boosted the company’s shares by as much as 49.2p to 378p, although they were still significantly below the 500p break-even point above which taxpayers would receive a return on the  £45 billion injected into the Edinburgh-based company to prevent it collapsing during the financial crisis.

The shares settled back at 373.6p, still a rise of nearly 14 per cent.

Chancellor George Osborne has already sold down the Government’s stake in Lloyds Banking Group from 42% to 24 per cent but is yet to start selling off RBS. On this, McEwan added: “We’re focused on creating a stronger bank that is the most trusted in Britain.

“When the Government is ready to sell, we’ll be prepared for that,” he said.

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