RBS back in the red after £825m APS charge

5th Nov 2010 07:08

Part-nationalised bank Royal Bank of Scotland saw a 10% increase in its core operating profit in the third quarter over the preceding one.Core operating profit, excluding fair value of own debt (FVOD), climbed to £1,732m. The company took an £858m charge in respect of FVOD.Group operating profit excluding FVOD rose to £726m from £250m in the second quarter, representing a sharp turnaround from last year's third quarter loss of £1,042m.After restructuring costs, amortisation of intangibles and a £825m charge related to the Asset Protection Scheme (APS), the group recorded a loss before tax of £1,379 million, compared with a profit of £1,157m in the second quarter and a loss of £2,077m in the third quarter of 2009.The charge booked in the third quarter reflected tightening credit spreads across the portfolio of covered assets, whereas the deteriorating credit conditions in the second quarter of 2010 resulted in an APS credit.Group income in the third quarter was £7.9bn, as the group's Retail & Commercial businesses delivered good underlying growth, offsetting markets-related lower revenue in Global Banking & Markets (GBM). The net loss attributable to shareholders was £1,146m, compared with a profit of £257m in the preceding quarter of 2010 and a loss of £1,800m in the third quarter of 2009. The group's Core Tier 1 ratio at 30 September 2010 was 10.2%, compared with 10.5% at 30 June 2010. The decline reflects the attributable loss together with reduced risk weighted assets RWA relief from the APS as covered assets run-off.Impairments declined in the quarter to £1,953m, down 21% quarter-on- quarter and 40% year-on-year. The reduction in impairments was spread across the group, with the most significant improvements in Retail & Commercial and GBM. Non-Core saw impairments decline for the fifth consecutive quarter, although property-related impairments remain elevated."Our third quarter results demonstrate that we continue to make good progress in our recovery. We are delivering what we set out to achieve," claimed chief executive Stephen Hester."The Core Bank is becoming stronger. As we focus on serving customers better, profitability is also improving and rebalancing towards a more sustainable mix of business contributions. At the same time, the legacy risks and losses in Non-Core are being worked out effectively and our ambitious restructuring efforts continue apace," Hester added.