Royal Bank of Scotland said profits were improving at its core business and hefty Irish loan losses would start to decline in the second half of the year, sending its shares higher. RBS, 83-percent owned by the UK government following its bail-out during the credit crisis, had a first quarter group loss of 528 million pounds ($841.5 million) as the company racked up 1.3 billion pounds in bad debts at Ulster Bank.
But profits at its core business - namely its main retail and investment banking arms and excluding businesses due to be sold off - rose 25 percent from the final quarter of 2010 to 2.1 billion pounds, with profit margins also increasing. "RBS is pulling off the recovery that we have targeted," Chief Executive Stephen Hester said on a conference call.
RBS shares were up 6.4 percent at 43.06 pence in early afternoon trade. "Things are improving, albeit at a slowish rate," said Cavendish Asset Management fund manager Paul Mumford, who holds 3.75 million RBS shares. Customers at RBS' Ulster Bank are struggling to pay back loans given tough economic conditions in Ireland. However, the total charge for bad debts - 1.95 billion pounds - fell 9 percent 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.