RBS beats forecasts for second quarter operating profits

Majority state-owned Royal Bank of Scotland beat analysts' profit forecasts for the second quarter with the lender also announcing that it had picked Amsterdam as its post-Brexit hub for the European Union.

For the quarter ending on 30 June, RBS posted adjusted operating profits of £1.69bn, up from £761m one-year ago and ahead of analysts' forecast for £1.04bn.

That figure also compared favourably with the £1.371bn of adjusted profits seen during the previous quarter.

Revenues were ahead by 32% to £3.6bn and its common equity Tier 1 capital ratio was at 14.8%, ahead of its 13% target.

In remarks to Bloomberg TV, RBS finance chief Ewen Stevenson said he was "encouraged" by the latest set of interim results, the lender's best six-month performance since the comparable period of 2014.

He added that RBS was aiming to wrap-up its outstanding litigation in the US this year, which would weigh on the lender's bottom line.

Thus, RBS reiterated its target for a bottom-line profit in 2018. Targets for a cost-to-income ratio below 50% and a common equity Tier 1 ratio of 13% in 2020 were also kept.

Critically, a settlement with the US Department of Justice is a necessary pre-condition for the 71% state-owned lender to resume dividend payouts.

During the second quarter, RBS's cost-to-income ratio declined from 117.2% one year ago to 64.4%, as core operating expenses reduced by £151 million, or 4.2% versus the first half of 2016.

Nevertheless, its net interest margin slipped from 2.21% in 2016 to 2.13%. In the first quarter of 2017 net margins stood at 2.24%.

Stevenson said RBS was well-positioned for a prolonged low interest rate environment, adding that the lender was not planning for any significant improvement "in that for some time".

RBS also said it was talking to regulators on setting up its post-Brexit headquarters in the Dutch capital.

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