Royal Bank of Scotland Reports Record Profits Amid Uncertainty on Birmingham Midshires Deal

Strategic Insights -

The Royal Bank of Scotland has announced record pre-tax profits of $448m for the six months to the end of March, with its core UK and American banking arms performing strongly. Despite having to increase provisions for losses in South East Asia, the bank's chairman, Viscount Younger of Leckie, attributed the success to good progress in existing businesses and the development of new ones. Meanwhile, the bank remains tight-lipped over its failed attempt to take over the Birmingham Midshires Building Society, with Lord Younger saying only that discussions are continuing.

Key Takeaways:

  • The Royal Bank of Scotland reported a record pre-tax profit of $448m for the six months to the end of March, up 21% from $369m in the same period last year.
  • The bank's chairman, Viscount Younger of Leckie, attributed the success to good progress in existing businesses and the development of new ones.
  • The bank's Direct Line Insurance division showed a small increase in profits, despite very competitive markets.
  • The UK banking sector, where the bank has joint ventures with Richard Branson and supermarket giant Tesco, turned in a $461m profit before tax and other provisions, an increase of 25%.
  • The Citizens Financial Group in the US saw profits grow 30% to $108m.
  • The bank increased its fund to pay for potential losses in the Far East by $53m, with a total exposure to troubled economies of $605m, less than one per cent of the group's assets.
  • Credit card balances grew by $600m, or 69%, across the group, including Tesco Personal Finance and RBS Advanta.
  • Advanta, launched in 1996, turned a $3m loss for the same period last year into a $2m profit.
  • Direct Line Financial Services also turned a profit of $2m against a previous loss of $3m in the same period last year.
  • Shareholders will receive an interim dividend of 7.13p, up from 6.2p last time.

Statistics:

  • $448m: The Royal Bank of Scotland's record pre-tax profit for the six months to the end of March.
  • 21%: The increase in pre-tax profits from $369m to $448m.
  • 25%: The increase in profit before tax and other provisions in the UK banking sector.
  • 30%: The growth in profits at the Citizens Financial Group in the US.
  • $600m: The growth in credit card balances across the group, including Tesco Personal Finance and RBS Advanta.
  • 69%: The increase in credit card balances.
  • $53m: The increase in the bank's fund to pay for potential losses in the Far East.
  • $605m: The bank's total exposure to troubled economies, less than one per cent of the group's assets.
  • 7.13p: The interim dividend paid to shareholders, up from 6.2p last time.

Sources:

  • The Royal Bank of Scotland (press release)
  • The Royal Bank of Scotland (Chairman's statement)
  • Reuters (banking news)
  • Bloomberg (business news)