State-rescued Royal Bank of Scotland scrapes into profit

6th August 2010, Comments 0 comments

Royal Bank of Scotland, rescued by the taxpayer at the height of the financial crisis, scraped into profit in the first half of 2010, it said on Friday, capping a strong recovery for Britain's main banks.

RBS said it made a net profit of nine million pounds (11 million euros, 14 million dollars) in the six months to the end of June compared with a loss after tax of 1.042 billion pounds in the first half of 2009.

It comes at the end of a week during which major British banks HSBC and Barclays announced sharp rises to their earnings.

RBS, which is 83-percent owned by the taxpayer, edged into profit as write-offs from bad loans fell 31 percent to 5.16 billion pounds in the first half.

Chief executive Stephen Hester said the turnaround of RBS was on track, but added: "The rebuilding of RBS is a marathon not a sprint."

Net profits stood at 257 million pounds in the second quarter compared with a loss of 248 million pounds in the first three months of 2010.

"RBS second-quarter results show that the bank remains on track to meet the far-reaching goals of our five year restructuring plan which commenced last year," Hester said in the earnings statement.

"We are making good progress with disposals and overall business restructuring. Our customer base is solid and I believe that the future potential of RBS for all its constituencies becomes increasingly visible."

The price of shares in RBS rose by 2.42 percent to 53.2 pence in early London trade following publication of the results. The benchmark FTSE 100 was up 0.68 percent at 5,401.34 points.

Royal Bank of Scotland has slashed 22,600 jobs worldwide since finding itself ravaged by the credit crunch and the takeover of Dutch giant ABN Amro at the top of the market in 2007.

That led to RBS being pumped with a massive 45 billion pounds of British state money.

Earlier this week it was announced that RBS had agreed to sell 318 of its British branches to Spain's biggest bank Santander in a deal worth 1.65 billion pounds.

"The task of restructuring and improving RBS's risk profile continues to go well," Hester said on Friday.

"A central tenet of our five year plan is to make the bank safer for all its stakeholders. We continue to meet or exceed our targets for reducing non-core assets, strengthening liquidity and funding profile," he added.

The European Commission had ordered RBS to sell assets in return for receiving state aid.

The troubles at RBS also led to a boardroom shake-up with Hester replacing disgraced former chief executive Fred Goodwin, who in 2008 led the bank to Britain's biggest annual corporate loss -- at more than 24 billion pounds.

News of the turnaround at RBS caps a week of sharply improving results from Britain's main banks.

HSBC was the star performer, announcing that net profits at the Asia-focused lender had more than doubled to 6.76 billion dollars in the first half after it slashed US bad debt and raised earnings in emerging markets.

Barclays said its first-half net profit rose almost a third to 2.4 billion pounds thanks to a strong performance at its investment banking unit. Lloyds Banking Group, which like RBS was also rescued by the state, said it too had bounced back into profit in the first six months of 2010.

© 2010 AFP

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