RBS makes Brexit cash provision as it posts subdued profit rise

Bailed-out lender Royal Bank of Scotland has said it is setting aside £100 million to deal with “the more uncertain economic outlook” as it reported another rise in profits.

The Edinburgh-based lender, which is still more than 60 per cent publicly owned following its £45 billion taxpayer rescue more than a decade ago, reported a 14 per cent rise in third-quarter profits to £448 million, from £392 million a year earlier.

It credited lower costs from its transformation and increased digitisation for the performance as income remained stable - rising 15 per cent, partly reflecting lower disposal losses but shaky demand for borrowing in the run-up to Brexit.

However, the profits rise was still less than analysts had expected and shares fell 5 per cent in early trading on the back of the news.

The £100 million in cash set aside makes RBS the first big banks to make such a provision in the run-up to the UK’s exit from the EU and hints at a concern at RBS that some of its customers may have difficulty in future repaying loans to the bank.

Chief executive Ross McEwan told journalists during a conference call: “We have to be prepared for our customers no matter what happens.”

Earlier this month, Mr McEwan told the BBC a no-deal Brexit could tip the UK economy into recession.

He said a “bad Brexit” could result in “zero or negative” economic growth, which would hit RBS’s share price.

Mr McEwan told journalists that there was now “a more optimistic tone” coming from Prime Minister Theresa May in the Brexit negotiations, judging from the way she had spoken to him and other business figures on a call last week.

However, he added: “We are seeing large companies pause their investments until they get certainty.”

RBS also disclosed that it had received approval from Dutch regulators to serve EU clients out of Amsterdam after the UK leaves the EU.

The latest results also showed a further allocation of another £200 million in the July-to-September period to cover costs for the mis-selling of payment protection insurance (PPI).

The fresh PPI provision reflected “greater than predicted complaints volumes”, RBS said.

The bank has now set aside a total of £5.3 billion to deal with the mis-selling.

In the bank’s statement, Mr McEwan described the results as “a good performance, set against a highly competitive market and an uncertain economic outlook”.

He added: “We are growing lending in our target markets and are in a strong position to support the economy.”