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Royal Bank of Scotland - Profits jump but loan growth struggles

Nicholas Hyett | 27 April 2018 | A A A
Royal Bank of Scotland - Profits jump but loan growth struggles

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NatWest Group plc Ord GBP1

Sell: 260.10 | Buy: 260.30 | Change -1.50 (-0.57%)
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First quarter underlying profits hit £792m, up 206% on the same period last year, as income rose 2.8% and costs excluding conduct charges fell 2.1%.

However, income growth was driven by an 18% increase in the more volatile fee and trading income, offsetting a small decline in net interest income.

The shares fell 1.5% in early trading.

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First Quarter Results

Total loans to customers fell slightly and Net Interest Margin (the difference between what the bank pays to borrow and charges when it lends) was broadly flat. RBS has seen significant competitive pressure in the mortgage market, which has negatively impacted lending rates and mortgage volumes.

Operating costs, excluding conduct and litigation costs, were £39m lower as the bank becomes increasingly digital. Branch visits declined 7% versus last year, and the group saw a 21% increase in customers regularly using its banking app. The group now makes 55% of its personal unsecured loans through digital channels. The combination of lower costs and higher income mean the bank's cost to income ratio improved to 60.5%.

Bad loans increased to £78m, but remain relatively low.

RBS' CET1 ratio (a standard measure of a bank's capital) improved 0.5 percentage points to 16.4%.

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