Shares in Royal Bank of Scotland Group PLC (LON:RBS) jumped higher today as the state-owned lender reported its first quarterly profit since the third quarter of 2015, with the turnaround even better than expected.
For the three months to March 31, RBS made an attributable profit of £259mln, a turnaround from a £968mln loss in the same period last year, and well above forecasts for around £70mln.
After stripping out fines and settlements, the lender’s core operating business made a profit of £1.3bn, up from £1.02bn a year earlier.
The bank has not made a full-year profit in nine years, as it battles restructuring costs and conduct fines resulting from its years of over-expansion leading into the 2008 financial crisis.
WATCH: UK banks: Turnaround continues - Tip TV
READ: RBS reports wider-than-expected loss on litigation and restructuring costs
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RBS shares stormed higher, topping the FTSE 100 leader board in afternoon trading, with a 4.8%, or 12.1p gain to 265.5p.
Laith Khalaf, senior analyst at Hargreaves Lansdown: “RBS has been quick off the blocks in 2017, with a strong performance that has comfortably beaten expectations.
“The UK retail bank appears to be chugging along quite nicely, and even the investment bank chipped in with some decent numbers.”
Net interest margin 9 basis points higher
Its core capital ratio rose to 14.1% from 13.4% a year earlier, and its net interest margin of 2.24% was 9 basis points higher than in the first quarter of 2016,
RBS said its cost-cutting plan was ahead of schedule, with the firm having already stripped out 37% of the £750mln cuts planned for this year.
Restructuring costs were £577mln in the quarter, an increase of £339mln compared with Q1 2016, while litigation and conduct costs of £54mln comprised a number of small charges.
Closer to full settlement with shareholder groups
RBS said yesterday that it has moved closer to reaching a full settlement with the shareholder groups suing it over a share issue in 2008, just before it was bailed-out by the UK government.
READ: RBS reportedly offers bigger settlement to remaining claimants in rights issue case
However, 13% of those who claimed £4bn, saying they were misled about the financial state of the bank, are still heading for court next month.
The bank announced it had agreed terms with a further 9% of all the claimants, taking the total to 87%. The previous agreement was reached in December 2016.
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