RBS Banks £2bn In Pre-Tax Profit

RBS Banks £2bn In Pre-Tax Profit

Taxpayer-backed Royal Bank of Scotland has reported a return to profit in the third quarter as it slashed its bad debts and offset a plunge in income at its under-pressure investment arm.

RBS, which is 83% state-owned, posted pre-tax profits of £2 billion in the three months to September 30, compared to a £678 million loss in the previous quarter and a £1.6 billion loss the previous year.

Stock market turbulence, driven by increased global recession fears, saw income at investment arm Global Banking and Markets fall 29% to £1.1 billion in the period, RBS said.

However retail banking revenues held at £4.1 billion and bad debt charges were cut to £1,5 billion, down £728 million on the previous quarter, which was hit by Irish land values.

Stephen Hester, RBS chief executive, said the results "highlight the external pressures facing banks, and economies more broadly, which are making the road to recovery longer and bumpier than hoped for".

Shares in the bank were up nearly 3% after the update. RBS said it has now reached the halfway point of its five-year recovery plan adopted in 2009 and has met or exceeded all targets to date.

But Mr Hester warned there would be further cost cutting, including an undisclosed number of job losses, as the bank expected to implement the proposals put forward by the Independent Commission on Banking (ICB), which include ringfencing its retail operations from its investment arm.

The regulatory changes, combined with the weak outlook for economic growth, will lead to increased focus on its retail division and will require further cost savings, Mr Hester warned.

Her said: "Forward momentum will be challenging, however, until the economies we serve see stronger growth." Mr Hester added: "We will pursue additional cost cutting to reduce the impact on customers and shareholders of the regulatory and market developments."

The weak performance at GBM, driven by subdued client activity and cautious risk appetite, saw overall income fall by 18% to £6.4 billion. RBS said GBM posted a modest operating profit of £112 million in the quarter, compared to £446 million the previous three months, and expects difficult conditions to continue in the fourth quarter.


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