RBS makes over £1bn in Q2

6th Aug 2010 07:06

Royal Bank of Scotland (RBS) is "on track" to achieve goals set out in its five-year recovery plan after posting a pre-tax profit of £1.16bn for the second quarter of 2010.The bank, which lost £21m in the first quarter and produced a small profit of £59m this time last year, made £1.14bn for the half-year compared with a paltry £15m in the first six months of 2009.There was an operating profit of £869m for the three months to 30 June compared with a loss of £3.35bn in the second quarter of 2009 as impairment losses fell to £2.49bn from £4.66bn a year ago.Chief executive Stephen Hester said the numbers show RBS, still 84% government-owned, is "on track to meet the far-reaching goals of our five year restructuring plan which commenced last year". But he cautioned the rebuilding was a "marathon and not a sprint" and talked of a "difficult" quarter for the Global Banking & Markets business, the company's investment banking arm. The unit made an operating profit of £1.25bn in the quarter, up from £1.02bn a year ago, but down from £1.50bn in the first three months. Profit for the half-year was down to £2.74bn from £4.76bn.Hester said that result reflected negative capital markets sentiment, increased volatility and a subsequent drop in client activity. "These conditions have not yet abated," warned the boss.Jonathan Jackson at Killik Capital believes RBS remains a very high-risk investment and reminds income investors the bank is banned from paying an ordinary dividend for two years. "The UK government remains the majority shareholder and, given the need to reduce the deficit, it will be keen to exit this position sooner rather than later," he says. "This significant overhang is likely to weigh on the shares."Killik expect the shares, which currently trade in line with tangible book value of 52.8p, to display "warrant like volatility" for some time.