RBS rises despite weak profits

Perhaps the most closely watched stock on the FTSE 100, Royal Bank of Scotland, has made a profit before tax of £2,004m in the third quarter of 2011. This compares to a £1,560m loss at the same point in 2010.

However, this disguises some darker figures.

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The operating profit figure, which strips out balance sheet adjustments on the value of debt, was £267m for the quarter, down a whopping 63% on the same period last year. It was also down on analysts' consensus of £343m. The bank's Chief Executive Stephen Hester admits the picture is "mixed".

The biggest problems are so called "non-core" activities which sustained a loss of £997m. RBS's investment bank's performance was described by Hester as "modestly profitable in the third quarter". He also says that for the bank as a whole "forward momentum will be challenging".

The UK tax payer owns 83% of RBS after providing the world's biggest bail-out to the company back in 2008. That investment is not looking particularly healthy having fallen 45% in the last six months.

RBS is not as up to its neck in bad Greek debt as some of its European counterparts but has had to make an additional write down of £142m on Greek sovereign bonds for the end of the quarter, implying a "haircut" of 37%.

In stability terms, though, the bank looks reasonably well set with a core tier one capital ratio at 11.3%, up from 11.1% the previous quarter.

Commenting on the results Stephen Hester said:

"RBS will take clear action to adjust strategy where needed in the light of new economic and regulatory realities ... The path ahead is navigable, and we are committed to delivering the best of RBS for customers and shareholders."

Shares in RBS were up 3.6% in early trading.

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