RBS Posts Pre-tax Profit In FY14, Names Howard Davies Chairman; Stock Down

(RTTNews) - Royal Bank of Scotland Group Plc (RBS, RBS.L) reported Thursday a profit before tax in its fiscal 2014, compared to a hefty loss last year, benefited by lower operating expenses and higher net interest income. Separately, RBS announced the appointment of Howard Davies to succeed Philip Hampton as Chairman. RBS also agreed to sell a portfolio of U.S. and Canadian loan commitments to Mizuho Bank, Ltd. In London, RBS shares were losing around 4 percent.

RBS' annual statutory operating profit before tax was 2.64 billion pounds, versus a loss of 8.85 billion pounds in 2013.

Profit from continuing operations was 734 million pounds, compared to loss of 1.72 billion pounds a year ago.

The results excluded a loss from discontinued operations of 3.44 billion pounds, which reflected a 3.99 billion pounds fair value write-down in relation to the reclassification of Citizens to disposal groups, and a tax charge of 1.9 billion pounds.

Including loss from discontinued operations, attributable loss for the year was 3.47 billion pounds, compared to a loss of 9 billion pounds in 2013.

Operating profit for the year totaled 3.5 billion pounds, as against an operating loss of 7.5 billion pounds in 2013, helped by improved operating results from the core domestic businesses together with significant impairment releases in Ulster Bank and RBS Capital Resolution.

Total income was 18.20 billion pounds, lower than last year's 19.44 billion pounds. Net interest income, however, grew to 11.27 billion pounds from prior year's 10.99 billion pounds. Non-interest income fell to 6.92 billion pounds from last year's 8.45 billion pounds.

Operating expenses declined to 15.85 billion pounds from 18.51 billion pounds a year ago.

Looking ahead, for fiscal 2015, RBS intends to reduce costs by a further 800 million pounds in underlying operating expenses, taking the firm towards a long term cost:income ratio of under 50%.

The company said it expects core UK/Irish businesses to continue to perform well, but with some income headwinds.

Regarding the appointment, RBS said that Hampton would resign as Director and Chairman of RBS, effective August 31. Davies would join the board at the end of June and assume the role of chairman from September 1.

Davies is currently chairman of Phoenix Group, a non-executive director of Prudential plc, and a non-executive director of Morgan Stanley. He will step down from Phoenix and Morgan Stanley.

He will complete his work as Chairman of the UK Airports Commission before assuming the role of RBS Chairman and will retain his position at Prudential and as Professor of Practice at Sciences Po, Paris.

Separately, RBS announced signing a definitive deal with Mizuho Bank, Ltd., an unit of the Mizuho Financial Group, for the sale of a portfolio of U.S. and Canadian loan commitments. Under the deal, the parties continue to explore the transfer of certain associated derivatives, and the transition from RBS to Mizuho of certain coverage banking, debt capital markets, syndicate, and associated capabilities related to these commitments.

The portfolio sold to Mizuho comprises $36.5 billion of loan commitments, including $3.2 billion of drawn assets, as of December 31, 2014. The transaction is likely to close before the end of second quarter 2015. In London, RBS shares were losing 4.26 percent to trade at 386.10 pence.