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Q1 Profits For RBS Trebles Because Of Decreasing Costs

Q1 Profits For RBS Trebles Because Of Decreasing Costs
The Royal Bank of Scotland reported an increase in profits for the first three months of the current fiscal year at £792 million in comparison to the £259 million in profits made by the bank for the same period last year.
A reduction in conduct and litigation costs, and a reduction the costs of restructuring have been identified to be partly responsible for the significant increase in profits for the bank.
The bank has been implementing a plan to decrease in size which has resulted in the bank cutting down on its running costs. 72 per cent of the bank is owned by the British government.
The bank also reported its first profits in ten years in February this year which formed the backdrop for the goring importance of the first quarter results.
The profit figure was well above estimates.
There have been no funds apportioned to cater to the financial needs of covering the expenses for mis-selling claims of payment protection insurance (PPI) mis-selling claims
In relation to the credit crisis that is still hanging over the bank, it still faces the danger of a significant amount of fine in the United States for mis-selling mortgages. This fine could be imposed on the bank at any point in time this year. and there are estimates that it would be anywhere between $1billion and $9 billion.
Provisions for a fine of £3 billion has already been made by the bank. The bank is expected to start paying dividends once again after the issue of fine is deal away with.
The bank's chief executive, Ross McEwan, said: "This is a good set of results, showing the progress we are making, despite a more competitive market. Our income is up, costs are down and our capital has strengthened again."
One of the key indicators of strength of a bank – the "buffer" of capital, is high for RBS at 16.4 per cent which is well over its target of 13 per cent. This level means that the bank would be able to endure any fine from the US Department of Justice in the case of mortgage mis-selling.
The activities of RBS’s Global Restructuring Group (GRG) - its specialist recovery division, have put the bank under the scanner in recent times. The division operated between 2005 and 2013.
While this special division was portrayed to be a specialist unit of the bank that could help save a business, there are allegations against the bank that in fact the unit essentially mistreated thousands of small firms.
Richard Hunter, head of markets at Interactive Investor, said: "RBS continues to move away from its previous existence as something of a financial basket case, although the journey is far from over.
"There remain three major hurdles to be cleared in the form of settlement of the US legacy issues once and for all, the removal of the UK government stake and the resumption of the dividend."

Christopher J. Mitchell

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