Royal Bank of Scotland Delivers Strong First-Half Results with NatWest Integration

Strategic Insights -

The Royal Bank of Scotland has published its first-half trading results, showing a sharp rise in income and strong progress in integrating its £20 billion acquisition of NatWest Group. The bank's shares closed up 11.8% at £11.70, with pre-tax profits on a pro-forma basis reaching £1.51 billion. The integration of NatWest has resulted in annualised cost savings of £360 million, with a target of £550 million by the end of 2000. A total of 7,500 employees have been made redundant, with a target of 9,000 by the end of this year.

Key Takeaways:

  • Pre-tax profits on a pro-forma basis reached £1.51 billion, up from £1.36 billion in the previous year.
  • Annualised cost savings of £360 million have been achieved, with a target of £550 million by the end of 2000.
  • A total of 7,500 employees have been made redundant, including numbers already targeted by NatWest, with a target of 9,000 by the end of this year.
  • The merger is eventually expected to bring 18,000 job cuts.
  • The bank's group ratio of costs to income was scaled back from 60 to 55.7 per cent in the first half, but remains unacceptably high.
  • Total income at the group rose 10 per cent to £5.97 billion during a period of disruption.
  • Citizens Financial US banking arm saw a 60 per cent increase in income, while Direct Line insurance group saw a 27 per cent increase in income.
  • The merged group's core retail banking business pushed profits up 15 per cent to £1.2 billion on a pro-forma basis.
  • Corporate banking and financial markets increased profits by £72 million, despite flat net interest income.

Statistics:

  • £1.51 billion: pre-tax profits on a pro-forma basis
  • £360 million: annualised cost savings achieved
  • £550 million: target annualised cost savings by the end of 2000
  • 7,500: number of employees made redundant
  • 9,000: target number of employees to be made redundant by the end of this year
  • 18,000: total number of job cuts expected from the merger
  • 55.7: %: group ratio of costs to income, down from 60
  • 10: %: increase in total income
  • 60: %: increase in income at Citizens Financial
  • 27: %: increase in income at Direct Line
  • £5.97 billion: total income at the group
  • £1.2 billion: profits at the merged group's core retail banking business
  • £72 million: increase in profits at corporate banking and financial markets

Sources:

  • "RBS Delights City with Sharp Rise in Income" by Martin Flanagan, The Royal Bank of Scotland, July 2000
  • Business View, Page 17, The Royal Bank of Scotland, July 2000