Royal Bank of Scotland plc (RBS) shares rose to the highest level in more than a year after it notched its first quarterly profit since 2015 with a better-than-expected bottom line linked to aggressive cost cutting.
First quarter profits attributable to shareholders hit £259 million, the bank said, compared to a near £1 billion loss recorded over the same period in 2016. Adjusted operating profit was also impressive, rising to £1.37 billion and topping the FactSet compiled consensus of £1.27 billion.
"Our six core businesses made an adjusted operating profit of £1.3 billion in Q1. RBS has now averaged an adjusted core operating profit of over £1 billion for the last nine quarters," said CEO Ross McEwan. "This bank has a very strong core with great potential, and we believe that by going further on cost reduction and faster on digital transformation - we will deliver a simpler, safer and even more customer-focused bank, with a compelling investment case."
Operating expenses at the bank were also moving in the right direction, falling 18% to £1.8 billion. The bank's cost-to-income ratio also showed marked improvement, rising to 76.1% from 72% in the final quarter of last year. A further £750 million in cost cuts are planned for this year, RBS said.
The bank said it's on track to meet both full-year and medium term (to 2020) targets and plans to return to full year profit in 2018 - more than a decade after the lender, once the biggest in Europe, was last in the black.
RBS shares rose more than 4% in early London trading to change hands at 264 pence each, before paring gains to around 1.66%, or 257.6 pence each, by 11:00 BST in London.