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.


OPEC cut ‘biggest in almost 2 years’

Updated 18 January 2019
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OPEC cut ‘biggest in almost 2 years’

  • OPEC said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd
  • OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018

LONDON: OPEC said on Thursday it had cut oil output sharply in December before a new accord to limit supply took effect, suggesting producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand.
The Organization of the Petroleum Exporting Countries said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in almost two years.
Worried by a drop in oil prices and rising supplies, OPEC and its allies, including Russia, agreed in December to return to production cuts in 2019. They pledged to lower output by 1.2 million bpd, of which OPEC’s share is 800,000 bpd.
The reduction in December means that should OPEC fully implement the new Jan. 1 cut, it will avoid a surplus that could weaken prices. Oil slid from $86 a barrel in October to below $50 in December on concerns of excess supply.
OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018 although it was more upbeat about the economic backdrop than last month and cited better sentiment in the oil market, where crude is back above $60.
“While the economic risk remains skewed to the downside, the likelihood of a moderation in monetary tightening is expected to slow the decelerating economic growth trend in 2019,” OPEC said.
“This has recently been reflected in global financial markets. The positive effect on market sentiment was also witnessed in the oil market,” it said.
The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from US President Donald Trump to lower prices and cover an expected shortfall in Iranian exports.
OPEC changed course after the slide in prices starting in October. A previous OPEC+ supply curb starting in January 2017 — when OPEC production fell by 890,000 bpd according to OPEC figures — got rid of a glut formed in 2014-2016.
In a sign of excess supply, OPEC’s report said oil inventories in developed economies had stayed above the five-year average in November.
The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 468,000 bpd, the survey showed.
Saudi supply in November had hit a record above 11 million bpd.
The Kingdom told OPEC it lowered supply to 10.64 million bpd in December and has said it plans to go even further in January by delivering a larger cut than required under the OPEC+ deal.
The second-largest was an involuntary cut by Libya, where unrest led to the shutdown of the country’s biggest oilfield.
Output from Iran posted the third-largest decline, also involuntary, as US sanctions that started in November discouraged companies from buying its oil.
Iran, Libya and Venezuela are exempt from the 2019 supply cut deal and are expected by some analysts to post further falls, giving a tailwind to the voluntary effort by the others.
OPEC said in the report that 2019 demand for its crude would decline to 30.83 million bpd, a drop of 910,000 bpd from 2018, as rivals pump more and the slowing economy curbs demand.
Delivering the 800,000 bpd cut from December’s level should mean the group would be pumping slightly less than the expected demand for its crude this year and so avoid a surplus. Last month’s report had pointed to a surplus.
The figures for OPEC production and demand for its crude were lowered by about 600,000 bpd to reflect Qatar’s exit from the group, which now has 14 members.