2nd Aug 2019 08:01
(Alliance News) - Royal Bank of Scotland Group PLC on Friday reported rise in first half income following the sale of its stake in Saudi Alawwal Bank, allowing the lender to pay a 12 pence special dividend.
Saudi British Bank in October 2018 finalised an agreement to buy Alawwal Bank for USD5 billion, creating the kingdom's third-largest lender with USD71 billion in assets. The deal was completed in June.
RBS, through its Dutch-domiciled investment bank NatWest Markets, was part of a consortium including Stichting Administratiekantoor Beheer Financiele Instellingen and Spain's Banco Santander that held an aggregate 40% equity stake in Alawwal bank.
As a result, RBS has declared a 12p special dividend coupled with a 2p ordinary dividend, representing GBP1.7 billion being returned to shareholders.
The state-backed lender's operating pretax profit for the six months to June end increased 47% to GBP2.69 billion from GBP1.83 billion the year before. Profit attributable to shareholders more than doubled to GBP2.04 billion from GBP888 million.
First half total income grew 6.1% to GBP7.12 billion from GBP6.70 billion. Net interest income, however, slipped 7.6% to GBP4.00 billion from GBP4.33 billion.
The bank's net interest margin in the first half slipped to 1.83% versus 2.02% the year before. Operating expenses decreased 14% to GBP4.10 billion from GBP4.74 billion.
The lender's cost-to-income ratio improved dramatically to 57.2% from 70.4% the year before.
RBS's CET1 ratio at the end of June was 16.0%, down from 16.2% at the end of the first quarter in March. At the end of the first half last year, RBS's CET1 ratio stood at 16.2%.
The lender's risk-weighted assets are broadly flat year-on-year at GBP188.5 billion.
RBS total loans to customers edged 1.8% higher in the half to GBP310.6 billion from GBP305.1 billion the year before.
The bank's return on tangible equity for the period was 12.1% from 5.3% in the year before.
RBS has retained its 2019 outlook provided at the time of 2018 results. It continues to anticipate further GBP1.2 billion of foreign exchange recycling gains in the second half of 2019.
For 2020, RBS said: "Given current market conditions, continued economic and political uncertainty and the contraction of the yield curve, it is very unlikely that we will achieve our target return on tangible equity of more than 12% and cost-to-income ratio of less than 50% in 2020. These remain our strategic targets and we believe they are achievable in the medium term."
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