Royal Bank of Scotland Group Plc (RBS: Quote,RBS.L) reported Friday a narrower loss for the second quarter, while the lender's operating profit slipped 22 percent as revenue from its Markets businesses dropped. The company had to make provisions for a technology incident in June due to systems failure.
The results included a provision of 125 million pounds for costs related to the technology incident that affected the Group's systems in June, principally to cover customer redress. In addition, the company has provided 50 million pounds to redress interest rate swaps based on agreement reached with the Financial Services Authority, or FSA.
Commenting on the company's recovery plan, Stephen Hester, Group chief executive stated, "We have continued to make the bank safer and stronger as we clean up problems of the past."
In the second quarter, the company's loss before tax narrowed to 101 million pounds from 678 million pounds in the previous year. Group operating profit slipped 22 percent to 650 million pounds, as lower Markets revenues and technology incident provision were only partially offset by lower non-core losses, RBS stated.
Core operating profit, excluding impairment losses, was 1.52 billion pounds, down 11 percent from a year ago.
Payment Protection Insurance costs in the quarter were 135 million pounds, significantly lower than 850 million pounds in the previous year. In addition, the company recorded no sovereign debt impairment charges in the quarter, while it posted 733 million pounds in the year-ago quarter.
Total quarterly income declined to 6.44 billion pounds from 6.82 billion pounds in the prior year. Total net interest income was 2.97 billion pounds, lower than 3.23 billion pounds in the comparable period in 2011.
For the first half, the company posted a net loss of 1.51 billion pounds, wider than 794 million pounds in the preceding year. Net attributable loss for the period was 1.99 billion pounds, after 2.97 billion accounting charge for own credit. Attributable profit, excluding own credit adjustments, was 287 million pounds.
Operating profit in the first half was 1.83 billion pounds. Core operating profit was 3.19 billion pounds.
Customer deposits grew by 7 billion pounds from the previous year. At the end of the period, assets were down 22 billion pounds to 72 billion pounds.
Core Tier 1 ratio improved to 11.1 percent from 10.6 percent a year earlier. Excluding capital relief from the Asset Protection Scheme, or APS, the Core Tier 1 ratio was 10.3 percent. The company said it intends to exit the APS in the second half, subject to approval of the Financial Services Authority.
Looking ahead, the company said, "The economic and regulatory challenges we face are unlikely to abate over the remainder of the year. We will continue to focus on maintaining a strong balance sheet and capital position."
In London, RBS shares are currently trading at 215.11 pence, up 5.19 percent, on a volume of 7.35 million shares.
In US, RBS closed Thursday's regular trading at $6.35 on the NYSE.
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by RTT Staff Writer
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