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RBS results overshadowed by Brexit uncertainty and CEO search

RBS has warned of many challenges it faces over the next year. Photo Illustration: Igor Golovniov/SOPA Images/LightRocket via Getty
RBS has warned of many challenges it faces over the next year. Photo Illustration: Igor Golovniov/SOPA Images/LightRocket via Getty

The Royal Bank of Scotland (RBS.L) unveiled better than expected first quarter results amid losing its CEO Ross McEwan and battling against Brexit uncertainty.

Net profit reached £707m ($912m), over the consensus forecast of £546m. However, this is below £808m, which it recorded in the same period last year. RBS also reported an operating profit before tax of £1.013bn, compared with £1.213bn in the first quarter of last year. Income was lower at £265m, but operating expenses also fell by £73m.

The bank warned of many challenges it faces over the next year.

“We recognise that the ongoing impact of Brexit uncertainty on the economy, and associated delay in business borrowing decisions, is likely to make income growth more challenging in the near term,” RBS said.

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At the bank’s annual general meeting in Edinburgh on Thursday, RBS bosses warned of Brexit hitting the economy, which in turn would hurt its bottomline.

“The UK economy has proved remarkably resilient but lack of clarity about our future relations with the EU is undoubtedly having an impact, with consumer confidence muted and many businesses pausing on investment,” RBS chairman Sir Howard Davies said to shareholders. “That will affect our income.”

In October 2018, RBS warned of Brexit’s impact and took a £240m impairment charge, including £100m to reflect the “more uncertain economic outlook” in Britain ahead of the nation leaving the European Union.

Meanwhile, the bank also announced on Thursday that Ross McEwan was resigning as CEO and executive director at the bank. He will work his 12-month notice period until a replacement is found.

“For the past five and a half years Ross has worked tirelessly to make the bank stronger and safer, and played the central role in delivering a return to profitability and dividend payments to shareholders,” Davies said in a statement

McEwan helped to re-focus RBS on domestic banking activities and away from investment banking. The strategy helped to turn around RBS and the bank posted its first annual profit in a decade last year, before doubling them this year.