IBOS member RBS has announced their Q3 2016 financial results, in a report released on 28 October 2016.
RBS has reported an operating profit of £255 million in the Q3 2016. Across Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and Corporate & Institutional Banking (CIB) franchises, RBS reported an adjusted operating profit of £1,331 million.
In total, RBS has generated over £1 billion of adjusted operating profit across PBB, CPB and CIB in each quarter this year. Adjusted return on equity across PBB, CPB and CIB was 14% for Q3 2016. RBS’s mortgage net lending is up £3.6bn in Q3 2016, and RBS is consistently growing in market share, with a 12% share of new business compared to a stock share of 8.7%.
“Our core business results were good with a £1.3bn adjusted operating profit and a 14% return on adjusted equity. This is our best quarter for the core bank since 2014. The core business has now delivered on average over £1bn in adjusted operating profit for the last seven quarters,” said Ross McEwan, CEO of RBS. He continued, “across our core franchises, the strong lending performance in the first half of the year has stood us in good stead. We’re still comfortably on track to surpass our lending target for the year in Personal & Business Banking and Commercial with lending of 9%, above our 4% target.”
Below are the highlights of the Q3 2016 results, in comparison to Q3 2015:
- 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.
- The Q3 2016 operating profit was reported as £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 is stable for the year to date. 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.
- Restructuring costs were £469 million in the quarter, a reduction of £378 million compared with Q3 2015. Williams & Glyn restructuring costs of £301 million including £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.
Access the full report, via RBS’s website, here.