RBS Profits almost Wiped Out on US Fine

Profits at Britain's Royal Bank of Scotland almost evaporated in the second quarter after a vast US fine over its role in the notorious subprime crisis, the lender said Friday.

Earnings after taxation collapsed to just £96 million ($125 million, 108 million euros) in the three months to the end of June, RBS said in a results statement.

That compared with £680 million in the same part of the previous year.

Operating profit halved to £613 million over the reporting period.

Edinburgh-based RBS was hit by £782 million in litigation and conduct costs in the second quarter.

That helped to cover part of the vast settlement reached with US regulators earlier this year over claims it mis-sold mortgages in the run-up to the 2008 global financial meltdown and subsequent worldwide recession.

In May, RBS was fined $4.9 billion by the US Justice Department over its role in the subprime housing crisis but much of the cost had already been set aside, while the total was less than expected.

The lender also announced its first shareholder dividend in 10 years.

RBS plans to pay an interim dividend of two pence per share, though the timing of the payout is subject to the finalisation of its US settlement.

In morning deals, the company's share price jumped 3.3 percent to 258.30 pence on London's rising stock market.

"This (dividend) announcement was a pleasant surprise, and projects a positive image about the firm's financial health," said CMC Markets analyst David Madden.

"The UK government is a majority shareholder in the bank, and the dividend will be welcomed by Westminster -- but the pay-out will pale in comparison to the tens of billions of pounds that were spent rescuing the bank."

The lender remains majority-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.

In June, the rightwing Conservative government headed by Prime Minister Theresa May sold a 7.7-percent stake in RBS, leaving it still with a controlling stake of 62.4 percent, much of which it plans to offload through to 2023.

Source: Agence France Presse

Copyright © 2012 All Rights Reserved.