Royal Bank of Scotland shares knocked over Brexit blow despite profit rise

Royal Bank of Scotland posted a rise in third-quarter profit but the lender suffered a hit to its share price after warning over Brexit.

The lender, still 62% owned by the taxpayer, posted a 14% increase in profits to £448 million in the three months to September 30.

But RBS also took a £240 million impairment charge, including £100 million to reflect the “more uncertain economic outlook” in Britain ahead of Brexit.

Unimpressed investors sent the shares down around 5% in morning trade to 222p.

Joseph Dickerson, equity analyst at Jefferies, said: “The incremental (£100 million) charge is not explained well and is at odds with extensive research we conducted on corporate credit and also consumer credit.

“It is also at odds with the actions of other banks operating in the same market.”

Shares in Barclays, HSBC and Lloyds were also hit off the back of the RBS update.

However, referring to Brexit, RBS boss Ross McEwan said that in a recent call with Prime Minister Theresa May the lender sensed a “more optimistic tone” than in the past.

Third quarter figures also showed that pre-tax operating profit was up 10% to £961 million, but RBS also booked £200 million in provisions to cover costs for the mis-selling of payment protection insurance (PPI) in the period.

It reflects higher-than-predicted complaints volumes following a Financial Conduct Authority advertising campaign featuring Arnold Schwarzenegger aimed at encouraging people to come forward before an August 2019 deadline for final claims.

RBS has made provisions totalling £5.3 billion to date for PPI claims.

In total, RBS detailed £389 million in third-quarter conduct and litigation costs.

Mr McEwan added: “This is a good performance, set against a highly competitive market and an uncertain economic outlook.

“We are growing lending in our target markets and are in a strong position to support the economy. We’re aware there is much more work to do and are fully focused on improving for our customers.”

RBS also said on Friday that it has secured approval from Dutch regulators to serve EU clients out of Amsterdam post-Brexit.

Earlier this month, RBS paid out its first dividend in 10 years after reaching a long-awaited 4.9 billion US dollar (£3.7 billion) settlement with US regulators over claims that it mis-sold mortgages in the run-up to the financial crisis.

It was considered the largest of a string of legacy issues that the bank is starting to put to rest a decade on from its bailout in 2008.