RBS Posts Rise in Profit

LONDON—Royal Bank of Scotland Group PLC on Thursday reported a rise in second-quarter net profit as the once global bank continued its retreat to the U.K.

The bank, which is 78% owned by the British government, said net profit came in at £ 293 million ($457.2 million), compared with £ 230 million in the same period last year. Revenue fell to £ 4.3 billion from £ 4.9 billion.

In February this year RBS said it would accelerate its plan to shrink, exiting a raft of countries and dismantling large parts of its investment bank.

On Thursday the bank said that it was making good progress in boiling down its bad bank, which it expects to run down by the end of the year. RBS said it remained on track to sell down its interest in U.S. retail lender Citizens and shrink its investment bank.

RBS said that it plans to return excess capital to shareholders through dividends and share buyback but not before the beginning of 2017.

Adjusted operating profit, which strips out restructuring and other one-off costs, was £ 1.8 billion, down 7% on the year before as income from the RBS's investment bank dropped away.

In June the U.K. Chancellor George Osborne announced that the government would start selling down its holdings in RBS at a loss. The government spent £ 45.5 billion bailing out RBS during the financial crisis, in early June it valued its stake at £ 32 billion. The Treasury expects to raise at least £ 2 billion from share sales by April next year, and to have sold at least three quarters of the existing stake by 2020.

However, RBS still faces a series of fines, notably over allegations that it misled investors over the quality of U.S. mortgage backed securities it sold. On Thursday the bank put aside another £ 459 million to cover a series of litigation and conduct issues.

On Wednesday RBS said that it would cut its stake in U.S. retail bank Citizens Financial Group Inc. RBS plans to sell up to $2.6 billion of stock, reducing its stake in Citizens to around 21%.

Write to Max Colchester at [e-mail]

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