London pre-open: Operating profits disappoint at RBS

4th Nov 2011 07:40

Yesterday's advance looks set to continue today, albeit at a more sedate pace, as investors await October's US jobs data and further developments in Greece, where the government faces a vote-of-confidence motion in parliament today. City sources predict the FTSE 100 will open up 25 points from yesterday's close of 5,546. Part-nationalised lender Royal Bank of Scotland (RBS) announced a profit before tax of £2,0004m for the third quarter of 2011, a sharp turnaround from a loss of £1,560m in the third quarter of last year. Profits were boosted by a £2,3657m upward adjustment in the fair value of its own debt, whereas last year it made an £858m downward adjustment. The operating profit, however, fell to £267m from £726m in the third quarter of last year. That was below the £343m expected by the market."Our Core Tier 1 capital ratio is strong. Our loan:deposit ratio improved again, as did our liquidity position. Non-Core run-down is on-track for year end targets. Impairment charges fell, especially in Ireland," noted RBS chief executive, Stephen Hester.IAG, the company formed through the merger of British Airways and Iberia, is to add British Midland (BMI) to the mix, after agreeing in principle to buy the UK-based airline from Deutsche Lufthansa. The price has yet to be determined. IAG announced a profit before tax for the first nine months of 2011 of €355m, after exceptional items, up from €63m the year before.Medical technology business Smith & Nephew's profit before tax eased to $188m in the third quarter from $201m the year before, despite revenue climbing 10% to $1,032m from $941m. On an underlying basis, revenue grew 5%. Net debt tumbled to $196m from $600m a year earlier. Though pleased with the revenue growth, Oliver Bohuon, the chief executive of Smith & Nephew, said he was disappointed with the margin performance. "We are taking the steps necessary to reduce a cost base in Orthopaedics that is too high for on-going market conditions. I expect to see material improvements from Q4 onwards and am confident that the group will deliver a Q4 trading profit margin above 24%," Bohuon said.--jh