A shares surge added £1.5billion to the value of state-backed Royal Bank of Scotland yesterday after it said quarterly profits had doubled.
RBS, which is 80%-owned by the taxpayer, said profits before tax had risen to £1.64billion from £826million in the same period last year.
Meanwhile chief executive Ross McEwan indicated he would get round a government veto on giving bankers bonuses of twice their salaries by making changes to ensure he could pay enough to hold on to top staff.
Shares in RBS rose by as much as 13% after it published figures for the first quarter of the year, later settling back and closing up 8.2% at 331.7p – despite a warning from Mr McEwan there were still “plenty of issues from the past to reckon with”.
The trading update was the first since the group announced that it had tumbled to an £8.2billion loss for 2013 and launched a mammoth overhaul to slash costs by £5billion within three years.
This time, there were no new hits to cover past scandals or litigation, or major provisions such as the £4.8billion write-off it recently took to create a “bad bank” where it could hive off toxic assets.
RBS said it had seen a modest revival in lending volumes during the quarter, with improvements in UK retail and business banking while income from its markets business was lower as it shrunk its balance sheet. Costs also fell.
There was no mention of any plans to start returning the taxpayer stake to the private sector, in contrast to the buoyant first-quarter announcement in 2013 when RBS said the government should be able to start the process within a year.
Yesterday’s share-price surge failed to approach the 500p needed for the Treasury to achieve “break even” value on its £45billion rescue of the bank at the height of the financial crisis.
Meanwhile, Mr McEwan said he would do what it takes to hold on to highly-paid bankers affected by the Treasury’s veto on its plans to be able to pay 200% bonuses. Asked if fixed salaries would be raised to compensate, he said: “I just want to make sure that we are in a position to pay those people so we can retain them.”
The quarterly trading update noted that all the group’s major competitors planned to be able to pay bonuses at twice the rate of salary – which must be approved by shareholders under new European rules. RBS is limited to paying 100% bonuses.
Mr McEwan acknowledged it was an “emotive issue” but said RBS was a “back marker” on pay.
The chief executive said the cap affected a small number of people involved in its international markets division, in its restructuring operation, and in the US.