30th Jul 2015 06:59
LONDON (Alliance News) - Royal Bank of Scotland Group PLC said it doesn't expect to be able to return capital to shareholders until at least the opening quarter of 2017, as the bank reported Thursday an improvement in its capital position and 27% increase in second-quarter net profit.
The bank's guidance for when it expects to be able to return capital to shareholders may disappoint some analysts who had expected the bank to act sooner to pay a dividend or undertake a share buyback. RBS said it wants to make progress in a number of areas before returning capital.
"This is dependent on the achievement of certain strategic objectives, including sustained profitability, improved stress test results and resolving our major conduct and litigation issues," the bank said in a statement.
RBS said it made a GBP293 million net profit in the three months to the end of June, compared with GBP230 million in the corresponding quarter the prior year. Its common equity tier one ratio, a key measure of financial strength, increased to 12.3% from 11.5% during the quarter.
Chief Executive Ross McEwan warned that is will be a "noisy year" as the bank continues to restructure and deal with the consequences of its past conduct.
The list of legal, regulatory and government investigations that concerns RBS covers matters such as US mortgage-backed securities, foreign exchange trading, and its treatment of smaller business in the UK. The costs of compensating customers who were mis-sold payment protection insurance and interest rate hedging products have also weighed on the bank.
RBS said litigation and conduct costs amounted to GBP459 million in the second quarter, compared with GBP250 million in the corresponding quarter last year. Restructuring costs increased to GBP1.05 billion from GBP385 million.
McEwan has been leading the bank since October 2013, when he took over from Stephen Hester, who has since moved to RSA Insurance Group PLC.
The scale of the restructuring at RBS, which under McEwan has decided to abandon global ambitions and concentrate on lending in the UK, means the bank has not made a profit since 2007. In February, McEwan revealed that the bank will no longer operate a standalone investment bank.
The UK government, which still owns about 80% of the bank after rescuing it with a GBP45 billion bailout during the global financial crisis of 2007-09, wants to begin selling down its stake in the current fiscal year.
"This is an appropriate backdrop to the sale of shares by the UK government, which will be a significant moment for this bank," Chairman Philip Hampton said in a statement.
RBS is the second of the FTSE 100 banks to report second-quarter results, following Barclays PLC on Wednesday.
By Samuel Agini; [email protected]; @samuelagini
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