RBS beats forecasts on lower impairment charges and PPI claims

1st Aug 2014 07:52

The Royal Bank of Scotland (RBS) has reported a 367% increase in operating profits for the first half of the year to reach £2.6bn on the back of a sharp reduction in impairment charges.Analysts at Numis had been expecting profits £2.3bn. Nevertheless, total income decreased by 5.9% to £9.9bn.Operating expenses fell even faster, by 8.2% to £7.1bn. Impairment charges fell drastically, to £269m from £2.1bn for the comparable period of 2013. Restructuring costs for the first six months of the year amounted to £514m, versus the £645m forecast by analysts at Numis. Profits before tax thus rose substantially in the first half, by 93% to £2.6bn. No additional provisions for PPI claims were booked during the second quarter, whereas analysts had penciled in an additional £500m. As regards the outlook, the lender said it remains on track to achieve £1bn in cost reductions for the present year. Credit impairment charges are expected to remain low during the second half of 2014. Subject to macroeconomic conditions a full year charge of around £1bn is expected. Chief executive Ross McEwan said progress had been made in addressing all of the lender's key priorities: strengthening capital, reducing costs and increasing customer activity. However, McEwan sounded a note of caution, adding that RBS was "managing down a slate of significant legacy issues", including significant conduct and litigation issues such that "but no one should get ahead of themselves here - there are bumps in the road ahead of us".As of 08:26 shares in RBS were 0.93% lower 352p.AB