LONDON (Reuters) – Royal Bank of Scotland’s (RBS.L) profit halved in the first quarter as it set aside 802 million pounds ($1 billion) to cover an expected spike in bad loans due to the coronavirus pandemic, the state-backed lender said on Friday.
Despite the slide in profits, the bank’s results beat analyst expectations in part thanks to a 9% rise in income from a spike in trading in volatile markets at its previously loss-making investment bank NatWest Markets.
RBS Chief Executive Alison Rose said the bank was nonetheless still committed to cutting back the division and also said it would wind down digital bank Bó after it attracted just 11,000 customers since its launch in November.
RBS shares rose 4%, outperforming the STOXX European banks index .SX7P which was down 1%.
Britain’s biggest four banks – RBS, HSBC (HSBA.L), Barclays (BARC.L) and Lloyds (LLOY.L) – have now set aside a combined 6.7 billion pounds to cover an expected rise in defaults in the fallout from the health crisis.
Banks have been asked by the British government to deliver 330 billion pounds of taxpayer-backed loans to firms during the crisis but have faced criticism for not getting cash quickly enough to struggling companies.
RBS said it had provided 1.5 billion pounds of business loans under the government-backed coronavirus relief scheme – the most of any bank – and 190,000 mortgage repayment holidays.
“We moved very quickly. What I recognised, and the team moved very fast with, is that we were not in normal circumstances and so we redeployed staff very quickly and operationalised the scheme very quickly,” Rose said.
The bank posted pretax profits of 519 million pounds for the quarter, down from 1 billion pounds the previous year.
RBS remains 62% owned by taxpayers following its 45 billion pound state bailout in the 2008 financial crisis.
RBS Chairman Howard Davies told investors on Wednesday that the lender’s sharp share price fall since the outbreak of the virus meant it was unlikely the government would sell any of its shares soon.
RBS said Bó would be scrapped as a brand and its technology merged with another of its digital brands, Mettle.
Bó was part of the bank’s strategy to compete with fast-growing startups such as Monzo and Starling but had a sluggish start and failed to impress investors.
Rose said the bank had learned lessons from the short-lived experiment.
“Bó hasn’t failed. We’ve made a decision which is a prudent decision at this point … we will apply a disciplined view in terms of our approach to innovations, testing and learning.”
Rose said all staff affected – as well as 130 employees being cut from NatWest Markets – would be paid for the next six months and the bank would not take part in the government’s furlough scheme to protect salaries.