State-backed Royal Bank of Scotland said it was on the path to recovery as it reported a better-than-expected first-quarter operating profit and a big reduction in its balance sheet.
RBS, which is 82 per cent owned by the Government after being rescued during the 2008 financial crisis, reported a first quarter operating profit of £1.2bn, compared with a loss of £144m the previous quarter and a consensus forecast of £800m.
Chief executive Stephen Hester also confirmed that the bank will next week finish paying back the emergency loans it received from the British government in the midst of the financial crisis. It will also recommence payment of dividends and coupons on hybrid capital.
Profits were led by its reshaped and streamlined investment bank, which bounced back to an operating profit of £824m in the quarter from a £109m loss in the previous three months as capital markets improved.
Revenues in its new markets unit were £1.7bn, more than double the fourth quarter but down 18 per cent from a strong year ago period. RBS also spent £271m restructuring the investment bank.
“We are happy with progress in the first quarter although the economic and regulatory backdrop remains tough,” said Mr Hester. “RBS continues, markedly, to regain strength and resilience.”
He said the bank was making excellent progress in removing the “mistakes” of the past” with non-core assets being shrunk and liquidity strengthening.
RBS said its funded balance sheet had decreased by a further £27bn to £950bn. It has reduced its short-term wholesale funding by £23bn to £80bn. Non-core funded assets were down £11bn to £83bn.
Mr Hester said the Government has “no desire” to sell its stake in the bank at current prices and a deal is not imminent.
“As far as I am aware there is no desire to sell at current share prices and I find that entirely understandable,” he said. “While everyone is focused on that being the desired end game, I’m not aware of anything that’s imminent.”