* Q1 attributable loss of 528 million sterling, 1.95 bln impairments
* Expects Ulster Bank impairments to remain high in Q2
* Too early for estimate on PPI insurance claims impact
* Shares up over 3%, recovering from previous day’s fall
(Adds comments from CEO and fund manager, details)
London: Royal Bank of Scotland posted a 25% rise in core operating profit and said hefty Irish loan losses would start to decline in the second half of the year.
RBS, which is majority-owned by the British government, made a first quarter loss of 528 million pounds ($841.5 million) after it racked up £1.3 billion in bad debts at Ulster Bank. Customers in Ireland are struggling to pay back loans against a backdrop of tough economic conditions.
However the total charge for bad debts — £1.95 billion pounds — fell 9% from the final quarter of 2010. RBS said Irish loan losses would stay high this quarter before “gradually declining” in the second half of the year.
The bank’s core business - namely its main retail and investment banking arms and excluding its insurance unit which is due to be sold off or floated on the stock market in 2012 - had an operating profit of about £2 billion a quarter.
“RBS is pulling off the recovery that we have targeted,” chief executive Stephen Hester said on a conference call.
RBS shares, which have fallen some 3% over the last three months, were up 4.25% at 42.24 pence in mid-morning trade.
“In all, there are some signs that the recovery continues at RBS, even if numerous and significant hurdles remain,” said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.
However, ClairInvest fund manager Ion-Marc Valahu said RBS remained a stock to avoid.
“Nothing to write home about. RBS is still on life support from the government,” he said.
Insurance compensation shadow
Britain’s banks were rattled this week by Lloyds’ shock £3.2 billion charge to cover compensation for people sold insurance they could never claim or did not know they were buying.
Lloyds made the provision for payment protection insurance (PPI) complaints after banks lost a UK court case on the way policies were sold to millions of customers.
RBS said on Friday the impact from having to settle these insurance claims could be “material” but added it was too early to provide an estimate.
Deutsche Bank analysts have said the PPI mis-selling debacle could cost British banks £8 billion in total, and that RBS could face a £1 billion hit.
Also hanging over RBS is an impending report by the Financial Services Authority (FSA) regulator into its near-failure, which required the government to pump in £45 billion. Publication of the report has been held up by legal complications.
On Thursday, Britain appointed two senior corporate governance experts to ensure that the FSA’s delayed report into RBS’s troubles during the crisis was neither a whitewash nor stymied by legal rows.
CEO Hester said he remained uncertain over the timing of the FSA’s report, which is being examined by RBS’ lawyers, but added that the company remained keen for the report to be published.
“We think it would be a good thing if a report is published, as there’s a risk that people think there’s some smoking gun. If there is, we haven’t found it,” Hester said.