Royal Bank of Scotland profits come under pressure as uncertainty weighs

The results come a day after RBS warned of a Brexit hit as uncertainty weighs on the economy.

The bank, still 62 per cent owned by the taxpayer, said bottom line profit fell 13 per cent to £707m in the three months to March 31.

RBS has been hit by stiffer competition in the mortgage market and continuing uncertainty among businesses, with many reining in spending as Brexit fears linger.

Chairman Sir Howard Davies told shareholders that worries over the EU departure were hampering economic growth, which will take its toll on the bank's performance.

Outgoing chief executive Ross McEwan said: "This is a solid set of results set against a highly uncertain and competitive backdrop.

"We continue to support our customers through this Brexit uncertainty while investing and innovating in digital services to meet rapidly changing customer needs."

In October, RBS set aside £100m to reflect the "more uncertain economic outlook" in Britain ahead of Brexit.

The group said that while it is retaining its full year guidance, the "ongoing impact of Brexit uncertainty on the economy, and associated delay in business borrowing decisions, is likely to make income growth more challenging in the near term".

The figures showed that RBS shed £45m in costs over the quarter and is on track to take £300m out of the group by the end of the financial year.

RBS is having to come to terms with the departure of Mr McEwan, who announced his departure on Thursday - his resignation coming after nearly six years at the helm.

He has a year's notice period and will stay in the post until a successor has been appointed, and to ensure an "orderly handover".

The New Zealander said he had achieved his strategy set out when he joined the bank, having returned the bank to profitability and put it on a firmer financial footing.

Sir Howard said the search for Mr McEwan's successor will start immediately, with the bank casting the net internally and externally.

Alison Rose, who was recently promoted to deputy chief executive of NatWest Holdings, is seen as the leading internal candidate to take over from Mr McEwan.

RBS’ first quarter operating profits fell 16.5 per cent to £1bn, as total income fell by 8 per cent.

Hargreaves Lansdown said the figures were driven largely by the poor performance of RBS’ small investment banking business, with weakness in the business bank as well.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “There’s a degree of deja vu about RBS’ numbers – a lot of the key themes could have been lifted straight out of Barclays’ results on Thursday. The investment bank has seen income slip as client activity falls, while competition in the UK mortgage market is hitting margins on the high street.

"However, RBS added a few more clouds to the general gloom, with a prominent note of caution on the potential for Brexit to disrupt performance in the year ahead, and the departure of CEO Ross McEwan both negative for investor sentiment.

"Investors shouldn’t lose sight of the progress RBS has made in putting legacy issues to bed, and the banks’ hefty capital position means the new CEO will have plenty of options available to them, but these are nonetheless a disappointing set of numbers.”