Money Matters - Simplified

RBS reports narrow Q1 loss

RBS’s insurance division is still reeling under loss, as it posted 50 million-pound loss, compared to profit of 76 million pounds last year.

Benefiting from corporate restructuring, Royal Bank of Scotland Group PLC (RBS), the biggest government-owned bank in United Kingdom, reported narrower loss for the quarter ended March 31.

With the bad debt charges falling continuously, RBS reported that its loss in the first quarter narrowed down to 248 million pounds ($364.2 million), from 902 million pound in the same period a year earlier.

Stephen Hester, chief executive officer, stated that the result had met company’s expectations. He added that the economic recovery is benefiting its customers. If the recovery continues, RBS will return to profitability in the next fiscal year.

Analyzing the quarter
The decline in loss is majorly due to decreasing loan impairment charges, which totaled to 2.6 billion pounds in this quarter, 14 percent less than charges reported in the fourth quarter last year.

RBS had, in late 2008, received a giant bailout package from the government after its ABN Amro incurred loss during the financial crisis.

RBS’s investment banking business witnessed robust growth in the first three months this year. Further, bank’s retail and commercial division, which had been adversely affected during recession, is recovering.

The investment banking unit posted 1.47 billion pounds as profit, which is 68 percent more than the operating profit reported in the fourth quarter of 2009.

“We remain conscious of the economic imbalances still to be tackled globally and of the risk of specific events, such as those affecting Greece, with the associated danger of contagion.” -- Stephen Hester, chief executive officer, RBS

The impairment loss for the quarter stood at 2.67 billion pounds from 2.8 billion pounds in the same period last year.

Further, the operating profit amounted to 713 million pounds compared to loss of 1.35 billion in the same quarter a year earlier.

RBS’s insurance division is still reeling under loss, as it posted 50 million-pound loss compared to profit of 76 million pounds last year.

Bank cautious of economic imbalances
In order to restore normality, the bank is currently implementing a restructuring plan.

Though RBS is confident to bounce back to recovery, it is not negating the fact that the economy is still fragile.

In a statement, Hester said, “We remain conscious of the economic imbalances still to be tackled globally and of the risk of specific events, such as those affecting Greece, with the associated danger of contagion.”