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RBS reports first profit in 10 years RBS reports first profit in 10 years
(35 minutes later)
Royal Bank of Scotland has returned to profit for the first time in a decade as it continues its recovery.Royal Bank of Scotland has returned to profit for the first time in a decade as it continues its recovery.
Chief executive Ross McEwan told the BBC it was "a really symbolic moment."Chief executive Ross McEwan told the BBC it was "a really symbolic moment."
The bank, which is majority-owned by the taxpayer, made an annual profit of £752m compared with a £6.95bn loss the year before.The bank, which is majority-owned by the taxpayer, made an annual profit of £752m compared with a £6.95bn loss the year before.
RBS still faces a potentially massive fine from the US Department of Justice over the sale of financial products linked to risky mortgages.RBS still faces a potentially massive fine from the US Department of Justice over the sale of financial products linked to risky mortgages.
The bank had expected to settle the case in 2017, but is now hoping it will reach an agreement this year.The bank had expected to settle the case in 2017, but is now hoping it will reach an agreement this year.
RBS set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn.RBS set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn.
The issue complicates government plans to start selling down its stake in RBS.The issue complicates government plans to start selling down its stake in RBS.
"We have been constantly hit with the sins of the past with conduct and litigation issues and I've been heavily restructuring the business to bring it back to the UK," Mr McEwan said."We have been constantly hit with the sins of the past with conduct and litigation issues and I've been heavily restructuring the business to bring it back to the UK," Mr McEwan said.
The bank, which is 71%-owned by the taxpayer, has spent the past decade restructuring itself.The bank, which is 71%-owned by the taxpayer, has spent the past decade restructuring itself.
Mr McEwan said that 10 years ago RBS was the largest bank in the world, with a balance sheet of £2.2 trillion. This has now sunk to about £750bn.Mr McEwan said that 10 years ago RBS was the largest bank in the world, with a balance sheet of £2.2 trillion. This has now sunk to about £750bn.
"We've been restructuring the bank to being a really good UK/Republic of Ireland business," he told the BBC."We've been restructuring the bank to being a really good UK/Republic of Ireland business," he told the BBC.
"It's taken time but it's also taken a lot of cost to come out of countries and businesses that we just didn't want to be in."It's taken time but it's also taken a lot of cost to come out of countries and businesses that we just didn't want to be in.
"We are now operating in 12 countries as opposed to what was 38, so very focused on the UK.""We are now operating in 12 countries as opposed to what was 38, so very focused on the UK."
For the first time, RBS published the average pay gap between men and women in the bank, which it said was at 37.2%.For the first time, RBS published the average pay gap between men and women in the bank, which it said was at 37.2%.
"Our gender pay gap reflects an under-representation of women at senior levels," the bank said in its annual report. "That is not a satisfactory position and we know that we still have much to do to narrow the gap.""Our gender pay gap reflects an under-representation of women at senior levels," the bank said in its annual report. "That is not a satisfactory position and we know that we still have much to do to narrow the gap."
Share sale? When will the taxpayer recoup its RBS investment?
The government has said it will start selling off its shareholding by March 2019, but wants to wait for market conditions to be right before it begins. Analysis: BBC economics editor Kamal Ahmed
Mr McEwan said that once the share sale takes off, it could take three to five years for the government to significantly reduce its stake. After nine years when accumulated losses totalled £58bn pounds - today a symbolic profit for RBS.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "With the price now standing at around half of the government's breakeven point, the taxpayer's still going to come out of this nursing a significant loss." Does it mean the government can start planning more confidently about selling the 71% stake it holds on behalf of the taxpayer?
RBS shares dropped more than 4% to about 269p on Friday. The fact the share price went down this morning by nearly 5% suggests not.
Mr Khalaf said market hopes for a dividend this year may have been depressed due to the ongoing threat of litigation from the US Department of Justice and accelerating restructuring in the business. Investors are still nervous about the multi-billion pound fine the bank is expecting from the US.
At 269p, the RBS share price is still a long way below the 502p a share the government would need to break even on the billions of pounds it spent bailing out the bank a decade ago.
It has already sold some of its stake at a loss - and will have to continue on that path for a long period yet, in the hope that eventually the share price will rise above that 502p and, overall, a profit can be made.
Ross McEwan told me it would take three to five years before the government would have a "much smaller" level of ownership.
Selling the taxpayers' stake in RBS has proved a much tougher and longer process than anyone imagined a decade ago.
Critical reportCritical report
On Tuesday, after months of wrangling, MPs released a report by regulators into the mistreatment of small business customers by the bank.On Tuesday, after months of wrangling, MPs released a report by regulators into the mistreatment of small business customers by the bank.
Mr McEwan said the report "did make for really tough reading".Mr McEwan said the report "did make for really tough reading".
"We did not get it right for customers at the time they needed us when their businesses were struggling," he said."We did not get it right for customers at the time they needed us when their businesses were struggling," he said.
"We just didn't look after them well enough"."We just didn't look after them well enough".
The bank has now put in place a complaints process overseen by a former high court judge, Mr McEwan added.The bank has now put in place a complaints process overseen by a former high court judge, Mr McEwan added.