RBS (LON:RBS) shares rallied on Friday after the UK bank revealed a 49% decline in first quarter profit due to provisions for bad loans related to the coronavirus pandemic.

RBS set aside £800m to deal with the impact of coronavirus meaning first quarter profit fell to £519m, down from £1,013m in in the same period a year prior.

RBS shares rallied despite the sharp reduction in profit with shares up over 2% at 112p in the first hour of trading on Friday.

Investors may have taken heart from the fact that if RBS had not set aside £800m to deal with COVID-19, the bank would have actually had a very stronger quarter and been well ahead of last year’s profitability.

Barclay’s shares rallied in a similar fashion after their first quarter results. The absence of significant PPI provisions were just starting to become evident in bank’s earnings and this combined with strong underlying earnings would have made the banks an attractive prospect.

However, bank COVID-19 provisions have almost wiped out profit for the first quarter so investors will now have to focus on whether there will be further provisions in the second quarter.

Commenting on the operations of RBS, the bank highlighted a successful shift to working from home despite managing to keep 90% of their branches open.

“We remain available to support as required; our systems remain robust and we have ensured that more than 90% of our branch network remains open, alongside our telephone, internet and mobile app channels. Across the Bank, over 60,000 colleagues, including those working in call centres, are now set up to work from home. Additionally, the Bank has committed to support special leave with full pay for all colleagues for six months as required,” RBS said in a statement.

RBS also pointed to increased capital ratios due to the scrapping of the dividend. A CET1 ratio would support the resumption of dividends if this can be maintained through the crisis.

“Following significant capital strengthening in recent years, the Bank is currently in a strong position to deal with a likely significant economic downturn. The CET1 ratio increased to 16.6% in the quarter following the cancellation of proposed dividend payments partially offset by the impact of increased RWAs. The Liquidity Coverage Ratio (LCR) remains strong at 152%.”

NatWest Markets also released a first quarter updated which pointed to disruption due to COVID-19 but largely had a strong quarter with income rising to £385m.