Royal Bank of Scotland (LON:RBS) have continued their already positive year with a third successive quarter of profit. For the third quarter RBS made a profit of £392 million, pushing their profit for the year up to £1.33 billion.
Some quarters have suggested this leaves RBS in a strong position to finish the full-year in profit for the first time since their state funded bailout in 2008. RBS themselves have however expressed caution as they are yet to conclude a number of litigation cases in the US, as well as being under a fresh investigation by the Financial Conduct Authority over mistreatment of small business customers. The firm have already made provisions for these cases, whilst also warning that there may be the need for further substantial provisions.
RBS has seen their net interest margin decline for both the third quarter and first nine months of the year, compared to the year previous. In the third quarter net interest margin fell five basis points to 2.12% and fell 2 basis points for the first nine months to 2.16%
One off payments for PPI claims was £115 million for the quarter, leaving them with £979 million of provisions. This is an increase in payments from £81 million in Q2 2017, which was expected as new FCA media campaigns has had a significant impact on the number of claims.
RBS’ long term target for Common Equity Tier 1 ratio is 13%, managing to be above this target for the quarter as it increased by 70 basis points to 15.5%. This strong performance reflected “continued RWA (Risk-Weighted Asset) reduction, the attributable profit and a reduction in the prudential valuation capital deduction, broadly offsetting the Capital Resolution losses taken in the quarter”.
The group, that also owns Natwest, stated firm progress in all four of the target areas they have identified. Income has grown 7.5% for the year to date, operating expenses has been reduced by £708 million, capital usage has been reduced and they are moving toward resolving legacy issues.
RBS shares have remained close to their opening price, increasing 0.4% to 282p at the time of writing, despite early strong performance.
