RBS returns to dividends

The common equity tier one ratio (CET1) may have reduced by 30 basis points on the prior quarter to 16.1 per cent – after including the settlement, a £2bn contribution to the defined benefit pension scheme and the intended dividend – but was still comfortably ahead of management’s 13 per cent target. However, after litigation and conduct costs more than doubled to £808m, the attributable profit declined 5 per cent to £888m.

The core personal and business banking operations benefited from a 9 per cent reduction in operating expenses, driven by falling headcount and back office costs, boosting operating profits 8 per cent higher to £1.4bn. That was despite a marginal reduction in net interest income, as balance growth and deposit pricing benefits were offset by continued margin compression in the competitive mortgage market.

Total income at the commercial banking business increased 11 per cent to £1.78bn, as fair value gains offset lower lending. Together with a 14 per cent reduction in operating expenses, that meant operating profits jumped more than a third. The private banking operations also benefited from lower operating expenses, but more so from growth in lending and assets under management, with operating profits rising 90 per cent to £156m. Investment banking operations NatWest Markets reduced legacy risk-weighted assets by another £2bn to £50.1bn. However, total income decreased almost a fifth, largely due to a downturn in European bond markets affecting income from the rates business.

Analysts at Investec expect adjusted net tangible assets of 281p a share at December 2018, from 294p the same time last year.