RBS cuts costs, investors remain wary

However, RBS retains two big thorns in its side. The first is the government sale of its majority stake, which is likely to depress the share price. But the most concerning is its impending fine from the US Department of Justice over alleged historical mis-selling of mortgage-backed securities – that could hinder profitability this year. So too could an expected £2.5bn in restructuring charges as the bank accelerates its transformation programme in 2018, including further investment in digital banking technology. The aggregate charge will be well up on the previously guided figure of £1bn, and management has removed its guidance for an absolute cost base in 2020, so uncertainties linger.

Innovation could be just the ticket, particularly since net lending growth lagged its 3 per cent target, at 2.2 per cent last year. In UK personal and business banking, customer loans increased 6 per cent to £163bn, with mortgages particularly strong. However, it was a reduction in operating expenses that lifted operating profit at the segment by more than a third to £2.4bn. Lower costs were also behind the increase in commercial banking profits of almost half, despite a £156m increase in impairment charges.

NatWest Markets reduced its operating loss to £977m from £1.87bn the previous year. Expenses relating to its legacy business declined significantly, with headcount cut by more than three-quarters as it moved towards closure. Core income increased 9 per cent, with income from rates offsetting lower currency trading.

Analysts at Shore Capital expect adjusted net tangible assets of 320p at the December year-end, up from 294p in 2017.