National: RBS boss hails progress as bank repays emergency loans
ROYAL Bank of Scotland boss Stephen Hester today hailed progress in “removing mistakes of the past” as the lender prepares to repay the last of the emergency loans taken during the financial crisis.
The taxpayer-backed bank said that by the end of next week it will have repaid the �75 billion in loans it took from the UK government at the height of the financial crisis with a final �5.7 billion instalment.
RBS will have repaid a total of �163 billion in loans, including support from the Bank of England and US Federal Reserve, since 2009 but the UK government will still own 82% of shares in the bank after its �45.5 billion bailout.
The progress means the lender, which revealed a loss before tax of �1.4 billion for the three months to March 31, compared to a �2 billion loss last year, can start paying out certain dividends that it was banned from handing out under bailout conditions.
The RBS announcement comes after fellow part-nationalised bank Lloyds said it will have repaid all of its �157 billion of loans by the end of the year.
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The �163 billion in emergency loans included �36.6 billion in emergency liquidity assistance from the Bank of England, and some �52 billion from the US Federal Reserve, as well as �75 billion from the Credit Guarantee Scheme.
RBS, along with hundreds of banks across Europe, is still receiving some central bank support via the 10 billion euros of cheap three-year loans from the European Central Bank’s long-term refinancing operation.
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However, this has been seen by the City as an opportunity to raise cheap funding rather than necessary financial support.
Mr Hester said the bank had met some “important recovery milestones”.
RBS, which owns NatWest, reported an operating profit of �1.1 billion, after excluding its own credit adjustments, compared to an operating loss of �144 million last year.
UK retail operating profits were up 4% at �477 million, compared to �458 million, but Ireland’s Ulster Bank still faces “exceedingly difficult” market conditions and recorded operating losses of �310 million, driven by bad debts.
The retail and commercial division has been hit by a weak economy and low interest rates, RBS said, but delivered return on equity of 13%, excluding Ulster.
The investment banking arm, which was subject to a huge restructuring in January, involving job losses and closures, rebounded amid improved market conditions in the first quarter. The division recorded operating profits of �824 million, compared with a loss of �109 million in the previous quarter.
Insurance arm Direct Line Group recorded a 25% increase in operating profits to �84 million as progress continued in hiving off the business through a public flotation.
The group’s charge on bad debts was down 22% from the previous quarter and down 33% on a year ago at �1.3 billion.
The lender paid out �14.3 billion of gross new loans and facilities to UK businesses during the first quarter of the year, including �7.9 billion to small and medium enterprises (SMEs) - up 18% from Q1 2011.
RBS also increased its compensation for covering payment protection insurance complaints by �125 million, to reflect an increase in claims received, bringing the cumulative charge taken to �1.2 billion.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “In all, life support is being removed, with the bank’s near failure now being consigned to another chapter in its history.”