Royal Bank of Scotland reported on Friday its first full-year bottom-line profit since it was bailed out and taken under the ownership of the British taxpayer.
The company, which is still 71%-public owned, reported annual attributable net profit to ordinary shareholders of £752m, after a loss of £6.95bn in 2016.
This was its first annual profit since 2007 - a year before the bank was bailed out during the financial crisis in 2008 - and beat the £592m loss expected by City analysts.
In February 2017, RBS forecast it would not make an annual profit until 2018 - expecting a multibillion-dollar bill in fines and costs from the US Department of Justice (DoJ) to be settled in the fourth quarter. However, the DoJ action was not settled in 2017 and looms large in 2018.
Full-year financial highlights
- Operating profit of £2.24bn after an operating loss of £4.08bn in 2016
- Total revenues of £13.1bn, up on £12.59bn in 2016
- Net interest margin of 2.13% compared with 2.18% in 2016
- Cost income ratio of 79% down from 129% in 2016
- Earnings per share - adjusted and fully diluted 25.2p from 5.2p in 2016
- Basic earnings per share 6.3p after a loss of 59.5p a share in 2016
The company anticipated increased restructuring costs as it accelerates its transformation programme in 2018, but the rate of cost reduction was expected to be materially lower than in 2017.
RBS added that it remained committed to restarting capital distributions when permitted, with resolution with the US DoJ being a key milestone to enable this, and expects a return on equity above 12% by 2020.
Chief executive Ross McEwan (left) said: "I would like to thank shareholders for their continued support. We welcome the indication in the Chancellor's budget statement about the potential to restart share sales during the fiscal year 2018/2019, again this is a further proof of the progress we have made.
"As the number of our legacy issues reduces, and our business performance improves, the investment case for this bank is clearer, and the prospect of us rewarding our shareholders is getting closer."
Suvi Platerink Kosonen at ING said: "The one-offs keep coming, and the bank guides for higher restructuring costs than expected earlier. With the US DoJ settlement still to come, the bank is not out of the woods yet."
Ian Forrest, analyst at The Share Centre, added: “The lack of clarity on when the bank might reach a deal with the US authorities over alleged miss-selling of mortgage-backed securities was also noted by some analysts today, along with the fact that the bank made a loss of £583m in the final quarter of 2017.
“That led the shares to drop in early trading, although interested investors should appreciate that they have outperformed the market over the past six months.”
By late morning trade on the London Stock exchange, shares in RBS were down 4.57% to 269.1p.
Picture courtesy of RBS