Royal Bank of Scotland Rebounds into Quarterly Profit

Britain's bailed-out Royal Bank of Scotland bounced back into the black in the third quarter on lower litigation and restructuring costs, it said Friday. 

Earnings after taxation hit £392 million ($518 million, 441 million euros) in the three months to the end of September, RBS said in a results statement.

That contrasted with a loss of £469 million in the same period of 2016.

The lender -- which is 71 percent owned by the taxpayer -- has now posted net profits every quarter so far this year. That has not happened since 2014.

"Our strategy to deliver a simpler, safer, customer-focused bank, is working," said Ross McEwan, chief executive of Edinburgh-based RBS.

"We have grown income, reduced costs, made better use of our capital and continued to make progress on our legacy conduct issues.

"Our core bank continues to generate strong profits and we remain on track to hit our financial targets."

The stricken lender was rescued with £45.5 billion of taxpayers' cash during the global financial crisis in the world's biggest banking bailout.

Since then, RBS has racked up several billion in conduct and litigation costs.

- 'Rap on the knuckles' -Earlier this year, RBS was slapped by US regulators with a huge $5.5-billion fine over its role in the subprime mortgage crisis more than a decade ago.

However, it has yet to reach a separate settlement with the Department of Justice (DoJ) -- and this could potentially push it into an annual loss in 2017.

"We remain optimistic we will get a result this year on DoJ settlement," McEwan told journalists on a conference call.

Once a DoJ settlement is reached, it would give the government an opportunity to consider selling down its shareholding, he added.

In Friday morning deals, RBS shares gained almost two percent to 286.60 pence on London's rising FTSE 100 index, as the bank nevertheless forecast it would be profitable in 2018.

"RBS faces the indignity of suffering a tenth year without a profit, though this really all depends on the timing and size of the fine that's coming from the US Department of Justice," noted Hargreaves Lansdown analyst Laith Khalaf.

"The fact the bank has said it expects to be profitable next year suggests RBS is bracing for a pretty imminent rap on the knuckles."

So far this year, meanwhile, RBS has stripped out £708 million in costs -- and remains on track to reach its £750-million target for 2017.

In recent years, McEwan has overseen a drastic overhaul, under which he has slashed the bank's investment banking activities and axed tens of thousands of jobs.

"The axe is still chopping away at costs," said ETX Capital analyst Neil Wilson.

"RBS is aiming to cut costs by £2.0 billion over four years," he added.