UK Bank, Royal Bank of Scotland has reported an operating profit before tax of £255 million, but an attributable loss of £469 million in Q3 2016.
This included restructuring costs of £469 million, litigation and conduct costs of £425 million (relating to US residential mortgage backed securities) and a £300 million deferred tax asset impairment.
This compared with a profit of £940 million in Q3 2015 which included a £1,147 million gain on loss of control of Citizens.
They reported a Common Equity Tier 1 ratio of 15.0% which increased by 50 basis points in the quarter and remains ahead of their 13% target.
The leverage ratio increased by 40 basis points to 5.6% principally reflecting the £2 billion Additional Tier 1 (AT1) issuance.
- RBS reported an attributable loss of £469 million in Q3 2016 compared with a profit of £940 million in Q3 2015 which included a £1,147 million gain on loss of control of Citizens. Q3 2016 included a £469 million restructuring cost, £425 million of litigation and conduct costs and a £300 million deferred tax asset impairment. The attributable loss for the first nine months of the year was £2,514 million and operating loss before tax was £19 million.
- Q3 2016 operating profit of £255 million compared with an operating loss of £14 million in Q3 2015. Adjusted operating profit of £1,333 million was £507 million, or 61%, higher than Q3 2015 reflecting increased income and reduced expenses.
- Income across PBB and CPB was 2% higher than Q3 2015, adjusting for transfers, and was stable for the year to date, as increased lending volumes more than offset reduced margins. CIB adjusted income increased by 71% to £526 million, adjusting for transfers, the highest quarterly income for the year, driven by Rates, which benefited from sustained customer activity and favourable market conditions following the EU referendum and central bank actions.
- NIM of 2.17% for Q3 2016 was 8 basis points higher than Q3 2015, as the benefit associated with the reduction in low yielding assets more than offset modest asset margin pressure and mix impacts across the core franchises. NIM fell 4 basis points compared with Q2 2016 reflecting asset and liability margin pressure.
- PBB and CPB net loans and advances have increased by 13% on an annualised basis since the start of 2016, with strong growth across both residential mortgages and commercial lending.
- Excluding expenses associated with Williams & Glyn, write down of intangible assets and the Q2 VAT recovery, adjusted operating expenses have been reduced by £695 million for the year to date. Adjusted cost:income ratio for the year to date was 66% compared with 67% in the prior year. Across PBB, CPB and CIB cost:income ratio of 60% year to date was stable compared with 2015.
- Restructuring costs were £469 million in the quarter, a reduction of £378 million compared with Q3 2015. Williams & Glyn restructuring costs of £301 million include £127 million of termination costs associated with the decision to discontinue the programme to create a cloned banking platform.
- Litigation and conduct costs of £425 million include an additional charge in respect of the recent settlement with the National Credit Union Administration Board to resolve two outstanding lawsuits in the United States relating to residential mortgage backed securities.
- RBS has reviewed the recoverability of its deferred tax asset and, in light of the weaker economic outlook and recently enacted restrictions on carrying forward losses, an impairment of £300 million has been recognised in Q3 2016. This action has reduced TNAV per share by 3p.
- TNAV per share reduced by 7p in the quarter to 338p principally reflecting the attributable loss, 4p, and a loss on redemption of preference shares, 4p, partially offset by gains recognised in foreign exchange reserves.