Royal Bank of Scotland has reported a pre-tax profit of nearly £1.4bn in the first half of the year, following a £1.6bn loss in the same period in 2012.
The profit figures were heavily influenced by a big drop off in one-off costs, which include costs associated with anticipated regulatory and legal action, monies for redress and the bank’s own credit adjustments, an accounting technique which allows a financial institution to adjust the value of its own debt.
In H1 2012 these one-off costs totalled a charge of £3.2bn, compared with £304m in the first half of this year. This included a further £185m provision for the costs of payment protection insurance, taking the total it has set aside to £2.4bn.
While the bank’s profit was up, overall income dipped slightly from £11.7bn in H1 2012 to £10.6bn in the first six months of this year. However, RBS’s operating expenses fell from £7.4bn to £6.8bn over the same period.
Outgoing chief executive Stephen Hester says the work to repair the bank since it nearly went bust in 2008 is “largely done”.
He says: “RBS’s journey from a ‘bust bank’ to ‘normal bank’ is largely done. But no small task remains – to harness the energies and strengths that have driven the bank’s recovery and to take RBS towards the target of being a really good bank for customers, shareholders and society as a whole.”
Since January 2008 the bank has increased its core tier 1 ratio, a measure of financial strength, from 4 per cent to 11.1 per cent as at 30 June.