The wealth arm reported a net interest margin of 3.38 per cent in the first three months of the year, versus 4.47 per cent. Private banking income fell to £204 from £219 million.

Risk-weighted assets at the wealth division stood at £11.7 billion in the latest quarter, versus £11.2 billion a year before, RBS said in a statement.

“Operating profit decreased by 34 per cent reflecting significant margin pressure, particularly on the deposit book. Net interest income fell 9 per cent, with a marked reduction in net interest margin partly offset by growth in client deposit and loan balances. Client deposits grew by 4 per cent with increases most evident in the UK as new products attracted funds. Assets under management increased modestly,” RBS said.

For the whole RBS group, it logged a first-quarter operating profit of £713 million, compared with a loss of £1.353 billion in the fourth quarter of 2009. However, there was a first-quarter net attributable loss improved to £248 million from a loss of £765 million in the fourth quarter of 2009.

RBS, like its UK peer Lloyds Banking Group, has been partly bailed out by the UK taxpayer and is in the process of spinning off some of its assets to repair its balance sheet. To date, there has been no suggestion that RBS intends to sell off any of its wealth management operations, either in the UK or overseas.

The group had a Core Tier 1 capital ratio of 10.6 per cent compared with 11.0 per cent at 31 December 2009.