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RBS swings to first-half profit, says no more than 150 jobs will move due to Brexit

  • RBS' recovery continued in the first six months of 2017, with the bank posting a £939 million ($1.23 billion) pre-tax profit through to the end of June.
  • Despite the earnings beat on Friday, RBS CFO Ewen Stevenson told CNBC that the bank may be set to record its tenth consecutive year without an annual profit in 2017.
  • When asked how many jobs the bank would likely relocate from Britain to the Netherlands as a consequence of Brexit, Stevenson replied, "I think probably no more than about 150 people."

RBS reported a large earnings beat on Friday morning with the U.K. lender highlighting that it had swung back to a first-half profit for the first time in three years.

RBS' recovery continued in the first six months of 2017, with the bank posting a £939 million ($1.23 billion) pre-tax profit through to the end of June. The lender said its core capital ratio, a key measure of financial strength, increased by 14.8 percent over the same period.

"We're encouraged by the results today, it's our second best six-month result since the crisis and our best set of six-month results since the first half of 2014," Ewen Stevenson, RBS chief financial officer, told CNBC on Friday.

Here are some of the highlights from the earnings:

  • £680 million ($894 million) for Q2 net profit vs. £212 million expected
  • CET ratio 14.7% for the first six months of 2017, versus a company target of 13%.
  • RBS plans to use Dutch license post-Brexit with no more than 150 jobs said to be relocating from Britain to the Netherlands.

The U.K.-based bank, which required a state bailout during the financial crash, has been unable to report an annual profit since 2007. It has waded through several legal scandals, job cuts and asset sales over the past decade.

Despite the earnings beat on Friday, RBS' Stevenson told CNBC that the bank may be set to record its tenth consecutive year without an annual profit in 2017.

"We know that we have still got at least one large issue ahead of us … the Department of Justice. So, if we get that settled this year I think we do expect that may push us in to a bottom line loss," he added.

Since the financial crisis in 2008, British-based lenders including HSBC, Barclays and RBS have all undergone a radical multi-year restructuring program. While the majority of RBS' restructuring is now complete, the bank still lags behind its rivals in returning to profitability.

Further to this, the bank faces several outstanding legal problems which could potentially impact the resumption of its dividends. Arguably the most pressing legal concern remains its long-running dispute with the Department of Justice (DOJ) over the mis-selling of mortgage-backed securities a decade ago.

RBS' Stevenson said on Friday that the bank was unable to provide an update as to when it expects to settle the case with the DOJ.

Last month, RBS was ordered to pay $5.5 billion to U.S. regulators for mis-selling mortgage-backed bonds in a similar case. The bank said it had agreed to settle the lawsuit with the U.S. Federal Housing Finance Agency (FHFA) after being accused of mis-selling $32 billion of mortgage-backed securities before the global financial crisis.

'No more than 150 jobs' relocating to the Netherlands

The bank revealed on Friday that it was in talks with the Dutch authorities to explore the possibility of centering its EU-focused business in Amsterdam post-Brexit.

"Obviously we've got a bank there with the appropriate licenses, we've had a long history in Amsterdam (and) for us at least it is a very logical choice," Stevenson explained.

When asked how many jobs the bank would likely relocate from Britain to the Netherlands, Stevenson replied, "I think probably no more than about 150 people."