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RBS profits surge but hefty US misconduct fine still looms large

Iain Withers
RBS HQ in London - Bloomberg News

RBS has reported a 70pc jump in quarterly profits, as the taxpayer-controlled bank continued to prepare the ground for a return to private ownership.

However, the bank gave no update on a looming multi-billion dollar fine from the US Department of Justice (DoJ) for past mis-selling of toxic mortgage products, which is the last major barrier to the Government starting to sell down its 71pc stake.

On a call with reporters, RBS boss Ross McEwan hinted further branch closures could be on the way, particularly at the business banking subsidiary it once thought it would have to spin out but has now kept, Williams & Glyn.

“The branch network that was going to be Williams & Glyn hasn’t been altered in close to nine years – we do need to look at the size and shape of it,” he said.

RBS’s pre-tax profits for the first three months of the year hit £1.2bn, up 70pc on £713m the prior year and beating City expectations.

Net profits more than tripled to £792m - a higher figure than profits the bank generated in the whole of 2017.

“This is a good set of results showing the progress we’re making despite a more competitive marketplace,” chief executive Ross McEwan said.

A fall in writedowns on bad loans and restructuring costs helped boost the bank’s bottom line.

But the bank's net interest margin – a core measure of profitability showing the key difference between the interest it receives in loans and pays on deposits – eroded further by two basis points to 2.04pc in the face of what Mr McEwan described as a “very competitive marketplace”, particularly in mortgages.

Commenting on the timing of the DoJ fine, he said: “I’ve given up choosing or commenting on when it will come. Hopefully it will happen sooner rather than later.”

Other banks including Barclays have settled similar but smaller cases in recent weeks, paving the way for the DoJ to resolve RBS’s fine.