Resurgent RBS is ready for a privatisation to lift spirits
Bailed-out bank is confident the taxpayer will see a profit in sell-off
Royal Bank of Scotland has returned to profit and says it will be ready for a privatisation next year.
A pre-election sell-off involving a public whose funds have kept the bank from bankruptcy could provide a much-needed shot in the arm for an embattled Government that has just taken a drubbing at the polls.
It would also provide a boost for RBS, which yesterday reported an £826m pre-tax profit for the first three months of 2013, the first quarterly profit since the third quarter of 2011.
The bank is desperate to be free from Government interference as it battles back to full health. Some £45bn of state funds has been poured into RBS.
Chief executive Stephen Hester said a share sale might have to be conducted in several tranches given the size of the Government stake — it holds 81 per cent of the shares — and it might have to take a loss at first.
But Mr Hester said he was “confident” that the taxpayer would be in profit “at the end of the process”.
The City took a sharply different view, marking the shares down with the bank still facing a mountain to climb if the Government wants to sell at a price even close to its 500p buy-in. RBS fell 17.5p to 289.8p.
Analysts remain sceptical of the bank’s attractions to private investors and core operating profits of £1.3bn were well below last year’s £1.6bn.
While retail and commercial bank profits rose, and bad debts fell, the investment bank’s earnings were sharply lower as RBS continues to shrink what remains the most controversial part of the business.
An upbeat Mr Hester told the Independent that despite the difficult economic situation, RBS is now in a position where he is confident that it won’t be knocked off course.
“I think we are enough progressed in the clean-up job that the plausible economic scenarios will present bumps in the road rather than knocking us off course,” he said.
“I don’t worry so much about completing the clean-up. I think we will do it.
“The issue now is, can we turn a normal bank into a really good bank?”
Mr Hester knows that for the bank to really start to motor, however, he needs the economy to pick up, and that remains a work in progress.
Ian Gordon, from Investec, spoke for the sceptics when he said: “We regard the RBS results as profoundly weak. Core UK retail and UK corporate still contribute negative loan growth.
“Markets division was awful with a 40 per cent revenue hit (over the first quarter of 2012) without adequate relief on the cost line. In truth, we regard all the noise over the past 48 hours around the so-called ‘privatisation’ of Lloyds and RBS as a complete smokescreen.”
A key driver for a sell-off of RBS could be a return to dividend payments. That would require buying off the Government’s “dividend blocker” with European Union agreement when the regulators are sufficiently confident that the bank holds enough capital to protect it from economic shocks.
The bank said its loan-to-deposit ratio had improved to 99 per cent. It hopes its core tier one capital ratio under banking supervisors’ Basel III agreement will be above 10 per cent some time in 2014.
The bank still has work to do, including the sale of just over 300 branches under the Williams & Glyn’s brand.
This sale was demanded by EU regulators as the price for the state support the bank has received.
RBS also has to dispose of its 48 per cent stake in the insurer Direct Line and potentially a partial sell-off of its United States retail bank Citizens.
Mr Hester said a pre-flotation sale of part of Williams & Glyn’s could happen as soon as this summer but a full sell-off would not happen until 2015.
First full-length look is finally here
World cities ranked in terms of safety, food security and 'liveability'
- 2 The awkward moment Sarah Palin raised $25,000 for Hillary Clinton's election campaign
- 3 Ball pool for adults opens in London
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 5 Baldness could soon be treated using stem cells, scientists hope
Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
Sex abuse inquiry: 'Victims receive death threats' after MPs release names online
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Teenager brandishing fake gun taken down by police after demanding airtime on Netherlands' NOS TV station
The awkward moment Sarah Palin raised $25,000 for Hillary Clinton's election campaign
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...