By Simon Miller
The Royal Bank of Scotland (RBS) will repay the last of the £163bn bailout money in the next week, the state-owned bank revealed in its Q1 results.
In addition, following the payback, RBS will begin paying dividend to preference shareholders as core operating level profit rose 4% to £1.18bn, compared with the same quarter last year.
However, thanks to accountancy rules, forcing it to account for any adjustment to its own credit, RBS failed to report a pre-tax profit leading to a £2.4bn charge resulting in a £1.4bn pre-tax loss compared with a £116m pre-tax loss in Q1 2011.
Stephen Hester, RBS chief executive, commented: “There's actually an irony in our first quarter results that we've reported an accounting loss because investors see us as safer, which causes a big charge for own debt. Go figure – I won't try and defend the accounting policies, but nevertheless. And so important milestones behind us.”
RBS received £75bn from the Treasury’s credit guarantee scheme – which has resulted in over £1.5bn in fees for the government – and the Bank of England’s special liquidity scheme while it was also provided £36.6bn in emergency liquidity assistance from the Bank and around $84.5bn (£52.2bn) from the US Federal Reserve.
Hester added: “We will next week complete paying off all of the government liquidity support that this Bank received in the crisis – a real milestone of recovery. And we're also turning on again; we're starting to pay again, dividends and coupons on our hybrid capital, which is one of the steps to rehabilitating us with investors.
“So I think, if you like, the risk reduction job, the rehabilitating RBS job, real progress in the first quarter, continuing what we've been doing before.”
The bank said it had continued to prioritise the task of strengthening and de-risking its balance sheet with the Core Tier 1 capital ratio rising to 10.8%, while strong liquidity metrics improved even further.
RBS reduced its short-term wholesale funding by £23bn to £80bn, which compares with a liquidity portfolio of £153bn.
In addition, the Group loan/deposit ratio improved to 106% and the run-off of Non-Core and the consistent elimination of legacy risks continued, with Non-Core funded assets falling £11bn to £83bn and Markets funded assets falling by £13bn.