State-owned Royal Bank of Scotland Group has reported a pre-tax loss of £968m for the first three months of the year, after a one-off dividend payment of £1.19bn to the government.
Operating profits rose to £421m for the first quarter - up from £37m during the same period in 2015, but total revenue fell 13 per cent to £3bn.
An absence of previous litigation and conduct-related costs saw the bank’s personal and business division report a jump in operating profit to £509m - up from £201m in the first quarter of 2015 and a £290m loss in the fourth quarter of 2015.
Litigation and conduct costs of £31m were down dramatically from £856m in the first quarter of 2015 and £2.12bn in the fourth quarter of 2015, which included additional provisions for mortgage-backed securities and foreign exchange litigation in the US, additional PPI provisions and other customer redress.
Growth in personal and business division was driven by strong mortgage activity, with new lending almost doubling to £7bn, from a “subdued” first quarter in 2015.
Buy-to-let new mortgage lending was £1.5bn, compared with £800,000 in the first three months of 2015 and £1.3bn in the final three months of 2015. “We now have nearly 1,000 mortgage advisers supporting our customers, an increase of over 20 per cent since the beginning of 2015,” the statement read.
“We continue to make better use of our digital channels to make it simpler to serve our customers and for them to do business with us,” it continued, adding that online mortgage renewals more than doubled to £3bn compared with Q1 2015
Mortgage applications were up 61 per cent from £6.4bn in the first quarter of 2015 to £10.3bn this quarter, providing what RBS called a “strong forward pipeline” for the second quarter this year.
Elsewhere, restructuring costs were £238m in the quarter, down £209m or 47 per cent compared with the first three months of 2015. The outlook did note that restructuring costs are expected to remain high in 2016, totalling more than £1bn.
“We continue to deal with a range of uncertainties in the external environment, not least those caused by the forthcoming referendum on the UK’s continuing membership of the European Union,” the bank stated.
“We will also have to manage conduct-related investigations and litigation, including US RMBS, throughout 2016, and substantial related incremental provisions may be recognised during the year.”
Finally, RBS gave an update on plans to divest Williams & Glyn, after “extensive analysis” which concluded there is a significant risk the separation will not be achieved by the previous target of 31 December 2017.
“Due to the complexities of Williams & Glyn’s customer and product mix, the programme to create a cloned banking platform continues to be very challenging and the timetable to achieve separation is uncertain,” the results read.
It is therefore exploring alternative means to achieve divestment, but noted the overall financial impact is now likely to be “significantly greater than previously estimated”.
Williams & Glyn did see new lending up 50 per cent to £1.4bn compared with Q1 2015, driven by new mortgages rising 107 per cent to £581 million, backed by a more buoyant market, greater productivity and more competitive pricing.
peter.walker@ft.com
