UK: RBS on track for return to private sector as first quarter profits top £800m
- Credit: PA
TAXPAYER-backed Royal Bank of Scotland said today that the Government should be able to start selling off its stake within a year as it reported its best quarterly profit since 2011.
In the clearest signal yet of a timetable for the bank’s return to the private sector, chairman Sir Philip Hampton said the recovery would be “substantially complete” by the middle of 2014 and that RBS would begin preparing a prospectus with the Treasury to sell to investors.
First quarter figures confirmed the bank’s turnaround efforts were paying off as it swung out of the red with pre-tax profits of £826million, its best performance since the third quarter of 2011.
Chief executive Stephen Hester said the clean-up at RBS will be largely complete within a year, meaning it could be privatised.
He said work to fix the banking giant would be “substantially complete”, allowing RBS to look “much more like a normal bank which can serve the economy and customers properly”.
He said the bank had posted profits of £826m and while there would be “bumps in the road” the company could operate as needed by itself.
Mr Hester said: “The clean up of RBS can be accomplished under our own steam in the next year, year and a half. I think we will be substantially done next year.
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“Obviously, it’s not my job to decide how public money is spent, I think most people believe enough public money has been spent on RBS and are looking forward to getting it back.
“So we can deliver an RBS that can do its job and is cleaned up in the not- too- distant future. The other debates are for Government, Government sets how to spend its money.”
Mr Hester said he was “open” to suggestions such as splitting the bank to remove bad assets.
“I think the critique would be the use of taxpayer money in large amounts and the time it would take,” he said.
“The extent to which there are advantages are in the eye of the beholder.”
Mr Hester said the bank had not held “explicit discussions” yet with the Treasury over the timing or details of a return to the private sector.
He added that while the process of selling down the stake could take a number of years, he was hopeful the taxpayer would eventually receive a higher price than that paid under the £45billion bailout at the height of the financial crisis, thought to be between 410p and 500p a share depending on the measure used.
“A privatisation would be a terrific thing for the country psychologically and taxpayer money would be freed up for other uses,” he said.
He added that first quarter results proved RBS chiefs were “cleaning up this bank successfully”, coming after recent calls for it to be split into a good and bad bank.
Bank of England governor Sir Mervyn King attacked the handling of the bank’s future in a parliamentary hearing in March and said RBS should be broken up.
Today’s figures also showed the difficulties still facing RBS as its core operating profit fell to £1.3bn against £1.6bn a year earlier after its investment banking division saw earnings more than halve to £294m from £826m a year ago.
Pre-tax profit figures were flattered by the absence of a large bill for payment protection insurance (PPI) mis-selling claims, as well as the lack of a hit from accounting charges for changes in the value of its own debt, which combined to send RBS into the red by £1.5bn in the first quarter of 2012.
Shares in the group fell 5% and Shore Capital analysts said the results for the core business were “disappointing”.