RBS quarterly profit higher than expected as legal costs fall

Conduct and litigation charges were just £19 million, down from £764 million a year ago, RBS said. (Reuters)
Updated 27 April 2018
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RBS quarterly profit higher than expected as legal costs fall

LONDO: Royal Bank of Scotland on Friday reported a much stronger than expected attributable pre-tax profit of £792 million in the first quarter, as costs from legal fines and restructuring fell.
Analysts had expected the state-backed bank, which returned to annual profit for the first time in a decade last year, to deliver £319 million in profit before tax.
Even after ten years of restructuring following the financial crisis, RBS is still not entirely back to normal. An outstanding multi-billion pound fine from the US Department of Justice (DOJ) is expected to put the bank back into the red at full-year results this year.
RBS said on Friday it had no news on concluding the DOJ talks, which it has said are a prerequisite for it to resume paying dividends and for the British government to start to sell its 71 percent stake in the bank.
Restructuring costs for the first quarter fell to £209 million from £509 million in the same period a year ago, while conduct and litigation charges were just £19 million, down from £764 million a year ago.
RBS also reported a common equity tier one capital ratio of 16.4 percent, up from 15.9 percent in February. That did not include the impact of a £2 billion payment into the bank’s group pension fund that will be booked in the second quarter.
While the bank’s headline profit figure showed a healthy business emerging from its years of restructuring and legal costs, the bank also showed some signs that increasingly competitive British banking market is squeezing its returns.
RBS’s net interest margin, a measure of the gap between what it pays savers and charges borrowers, fell by 0.2 percentage points from the same period a year ago amid competitive pressure on loan margins.
A long period of low interest rates in Britain and competition from upstart new lenders have combined to squeeze rates on mortgages and business loans in recent years, eroding bank profit margins.


Maalem Financing raises $26m in debut sukuk

Updated 17 October 2018
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Maalem Financing raises $26m in debut sukuk

  • The sukuk from Maalem, a shariah-compliant commercial and consumer financing firm, is a small but novel deal
  • The three-year unsubordinated deal was sold through a private placement and Maalem could tap the market again

LONDON: Saudi Arabia’s Maalem Financing has raised SR100 million ($26.6 million) from a debut sale of Islamic bonds, or sukuk, as the firm seeks to develop a crowdfunding product and expand its operations, a senior executive said on Tuesday.
The sukuk from Maalem, a shariah-compliant commercial and consumer financing firm, is a small but novel deal in a market that is dominated by issuance from sovereign institutions and Islamic banks.
The three-year unsubordinated deal was sold through a private placement and Maalem could tap the market again as early as January next year, said John Sandwick, a member of Maalem’s board of directors.
“The program is for SR500 million and with 3.6 times oversubscription, there seems to be a lot of demand,” he said.
Additional sales of sukuk aimed to raise between SR100 million and SR200 million, depending on market conditions, he said, adding that Maalem may consider a dollar-denominated sukuk issuance at a later stage.
The debut transaction used a structure known as murabaha, a cost-plus-profit arrangement commonly used in Saudi Arabia. The firm hoped to use an asset-backed structure for future deals, Sandwick said.
Established in 2009, Maalem received regulatory approval to operate as a non-real estate finance company in 2016 and increased its capital in 2017 to SR150 million.
The company plans to open several regional offices by the end of 2018 and is awaiting regulatory approval for a crowdfunding license, Sandwick said.
Crowdfunding enables startup firms to collect small sums of money from many individuals as an alternative to bank loans.
Albilad Capital, the investment banking unit of Bank Albilad, served as sole lead manager and arranger of the sukuk.