RBS bank posts first annual net profit in 10 years

LONDON: State-rescued Royal Bank of Scotland on Friday announced its first annual post-tax profit since 2007, or the eve of the global financial crisis, following a huge drop in litigation costs.

RBS, saved a decade ago by the UK government in the world's biggest banking bailout, posted a net profit of £752 million ($1.05 billion, 853 million euros) in 2017 following nine straight annual losses, the Edinburgh-based lender said in a statement.

"I am pleased to report to shareholders that... for the first time in ten years we have delivered a bottom-line profit," chief executive Ross McEwan said in the earnings release.

"We still have more to do on cost reduction, however this reflects the progress we have made in making the bank more efficient," he added.

The return to profit comes after RBS suffered a net loss of £7.0 billion in 2016 on massive litigation and restructuring costs.

The bank had been hit by litigation and conduct costs of almost £5.9 billion in 2016, largely over its role in the 2008 US subprime housing crisis.

Its litigation bill for 2017 was vastly reduced to around £1.3 billion, although with the bank facing a further massive fine ahead of its return to the private sector, its share price was sent sliding on Friday.

"Two very big shadows still loom over RBS," Laith Khalaf, senior analyst at stockbroker Hargreaves Lansdown, said following the results update.

"One is the impending fine from the US Department of Justice, which is going to take a big slice out of the bank's 2018 profits. The other is the large taxpayer stake, which has to be sold off at some point.

"That selling activity is going to put downward pressure on the bank's share price, so until it's... completed, the market isn't going to get too excited about RBS," Khalaf added.

RBS is 71-percent owned by the British government after the lender was saved with £45.5 billion of taxpayers' cash at the height of the global financial crisis.

With the bank slowly recovering, the UK government announced in November plans to relaunch its sale of RBS by selling about two-thirds of its majority stake for roughly £15 billion.

It is hoped that some £3.0 billion of shares would be sold each year up until 2023.

The government decided in 2015 to start selling a chunk of its then stake of about 80 percent in RBS but the plan was carried out only partially owing to the lender's low share price.