RBS, which is majority-owned by the taxpayer, has announced a statutory profit of £752m in 2017. The bank hasn’t seen a full year of profitability since 2007, and this is a vast improvement over the £7bn loss posted in 2016.
Hargreaves Lansdown senior analyst Laith Khalaf commented: “RBS has broken its ten year duck and managed to squeeze out a profit in 2017, thanks in large part to a big fall in litigation and conduct costs.”
The bank’s litigation and conduct costs fell to £1.3bn in 2017, compared to £5.9bn in 2016. This resulted in RBS seeing a total income of £13.1bn, a rise of 4.3%. Their operating expenses fell 36% to £10.4bn, and over the course of the year the bank made an 8.5% reduction in full time staff.
However, Khalaf further commented: “This is a stay of execution rather than a pardon however, because the bank is still facing a multi-billion dollar penalty from the US Department of Justice, which is now going to impair profitability in 2018.
“Two very big shadows still loom over RBS. One is the impending fine from the US Department of Justice, which is going to take a big slice out of the bank’s 2018 profits. The other is the large taxpayer stake, which has to be sold off at some point.”
RBS had hoped to settle the case with the US Department of Justice in 2017, but is now hoping that an agreement will be reached this year. The BBC has reported that the bank has “set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn”.
Despite the successful year for RBS, shares fell by 4% in early morning trading.
