Royal Bank of Scotland soars to pounds 265m profit: Aims to become UK's best-performing financial services group
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Your support makes all the difference.ROYAL Bank of Scotland has set its sights on becoming the UK's most efficient financial institution by 1997, after a rebound in pre-tax profits to pounds 265m in the year to 30 September from pounds 13m last year.
Lord Younger, chairman, said: 'Our overriding objective is to become the best-performing financial services group in the United Kingdom by 1997. The strategic progress we have made and the results achieved this year give us confidence that this target, while ambitious, is realistically within the reach of the company.'
The bank raised its dividend by 25 per cent to 11p, earning cheers from the stock market. The shares closed 33p higher at 428p, pulling other UK bank shares higher.
The main turnaround came in the UK banking business, which nearly quadrupled pre-tax profits to pounds 232m from a year ago. Provisions for bad and doubtful debts, which severely restrained profitability in 1992, fell 26 per cent to pounds 293m.
Peter Toeman, bank analyst with the stockbroker Hoare Govett, said that a key feature of the results was the decline in bad debts to 1.5 per cent of total lending - historically high but low compared with UK bank performance in the recession.
As previously announced, the company took a pounds 35m loss on its September disposal of 90 per cent of Charterhouse, the merchant bank. Profits rose in most divisions. Royal Bank's branch banking side reversed a pounds 16m loss into a pounds 70m pre-tax profit, helped by increased mortgage business at more favourable profit margins.
Corporate banking nearly doubled profits to pounds 130m from pounds 68m. Bad debt charges were halved to pounds 24m and the number of corporate customers rose by 20 per cent.
Improved credit card profits as a result of wider margins, lower bad debts and increased fees from retailers helped to lift profits in the operations division to pounds 32m from pounds 9m. Losses for central financing costs and company expenses were pared to pounds 28m from pounds 73m.
The US subsidiary, Citizens Financial Group, reported its best performance. Pre-tax profits rose 84 per cent to pounds 36.3m as it doubled its branches through acquisitions in Connecticut and Massachusetts, but provisions rose. As reported last week, Direct Line Insurance profits more than trebled to pounds 50m.
Expenses increased by 10 per cent to pounds 837m, and the number of employees fell by 1,200 in the year.
But income grew faster at 17 per cent, with non-interest income up by 32 per cent. This improved the cost-income ratio, a measure of efficiency, to 58.4 per cent from 62.4.
Bottom Line, page 38
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