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

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.

Merkel seeks united front with China amid Trump trade fears

Updated 22 May 2018

Merkel seeks united front with China amid Trump trade fears

  • Merkel seeks common ground to ward off trade war
  • Plans complicated by US policy moves

Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.

Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.

“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.

But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.

China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.

The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.

Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”

Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.

No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.

In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.

Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”

But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.

Ahead of her visit, Beijing fired off a rare salvo of criticism.

China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.

Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.

“Economic exchange cannot work as a one-way street,” he warned.

Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.

Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.

Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.

“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”