Royal Bank of Scotland Group Plc (RBS: Quote,RBS.L) reported Friday a wider loss for its first quarter, mainly reflecting charges on credit adjustments. The lender said it continued on the recovery path, delivering stable returns from Core businesses while improving further its strong capital, liquidity and funding position.
RBS will repay the last Credit Guarantee Scheme of 5.7 billion pounds in next week, with which it would have repaid 75 billion pounds of Special Liquidity Scheme and Credit Guarantee Scheme funding since 2009, the company said.
Chief Executive Stephen Hester said, "The start of 2012 has shown pleasing progress at RBS within the context of a flat economic environment...Excellent progress continues in removing "mistakes" of the past."
The company is now planning to resume discretionary coupons and dividend payments on hybrid capital instruments, which have been deferred for the last two years.
For its first quarter, RBS' pre-tax loss was 1.40 billion pounds, wider than prior year's loss of 116 million pounds. Loss per ordinary and B share from continuing operations was 1.4 pence, wider than 0.5 pence last year.
The bank booked a charge of 2.46 billion pounds for own credit adjustments as its credit spreads tightened, while it was 560 million pounds last year. A charge was booked in respect of the Asset Protection Scheme, sharply lower than last year. Payment Protection Insurance costs were 125 million pounds for the quarter.
Excluding own credit adjustments, pre-tax profit totaled 1.05 billion pounds. Managed operating profit, which excluded one-off items, grew to 1.18 billion pounds from 1.13 billion pounds in the prior year. The significantly narrowed non-core operating loss was largely due to lower trading losses.
Total income declined to 5.18 billion pounds from 7.06 billion pounds a year ago.
Net interest margin of 1.89 percent fell 14 basis points, reflecting the carrying cost of the liquidity portfolio and continuing pressure on liability margins.
In its Core businesses, retail & commercial segment has been challenged by a weak economy and persistently low interest rates, but delivered a return on equity of 13 percent, excluding the still loss-making Ulster Bank, the bank noted. The Markets business rebounded following the restructuring.
Group expenses declined 3 percent primarily driven by benefits from the bank's cost reduction program. Impairment losses plunged 33 percent driven by a significant decrease in non-core.
RBS' capital ratios strengthened further, with the Core Tier 1 ratio increasing to 10.8 percent from 10.6 percent at December-end, influenced by retained profits and a reduction of 2 percent in gross risk-weighted assets. The Core cost:income ratio was 60 percent, compared to 55 percent in 2011.
Looking ahead, the company said the economic and regulatory challenges should continue throughout 2012. Retail and Commercial performance would remain resilient, and markets, while off to a good start, will remain market-dependent.
RBI projects group net interest margin outlook to be stable with the first quarter of 2012, and expects to achieve further progress in balance sheet 'safety and soundness' agenda.
In London, RBS shares are currently trading at 25.21 pence, up 0.66 pence or 2.70 percent.
by RTT Staff Writer
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