Bank sees margins rising; no decision on insurance provision
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) — Royal Bank of Scotland Group PLC said Friday its first-quarter net loss more than doubled, but bad-debt charges continued to improve and lending margins had strengthened.
The group reported a net loss of 528 million pounds ($866 million), compared to a loss of £248 million in the same period a year earlier.
The worsening bottom line was mainly due to a higher tax payment and other accounting charges linked to the changing value of its own debt. RBS UK:RBS +5.88% RBS -3.49% said operating profit in the quarter rose 19% to £1.05 billion as total bad-debt charges dropped 27% to £1.95 billion.
The fall in impairment charges contrasted with rival Lloyds Banking Group PLC UK:LLOY +0.58% LYG -8.18% , which said Thursday that rising loan losses contributed to a £2.44 billion first-quarter loss. Read more about the losses at Lloyds.
RBS’ Irish bad-debt charges continued to rise and amounted to £1.3 billion in the quarter. Irish losses are expected to remain high in the second quarter, before starting to gradually fall in the second half of the year, it added.
Shares in RBS rose 3.2% in London trading, having lost close to 3% in the previous session on the back of the weak Lloyds results.
The other main driver of the loss for Lloyds was a £3.2 billion provision to cover claims over missold insurance policies. All the major U.K. banks were involved in selling the policies, but RBS elected not to take any provisions in the latest quarter because banks may still elect to appeal against an April court ruling that went against the industry.
“RBS continues to settle claims where we believe that the customer has not been treated fairly or has suffered some detriment,” the bank said.
Margin improves
RBS, which is roughly 83% owned by the government, said total revenue for the quarter fell 12% to £8.03 billion, as the group’s investment banking arm was unable to replicate its strong year-earlier performance.
Net interest margin improved marginally and the bank said it expects a further modest improvement over the rest of the year.
The margin figures also indicate a stronger trend than rival Lloyds, which said Thursday that its margin had fallen and that it would probably deteriorate a bit more over the rest of the year.
“Today’s results represent another step in the right direction for RBS, with the bank moving towards the end game of surplus capital being used to retire government B-shares,” said Investec Securities analyst Gareth Hunt.
