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Operating Profits, AuM Rise At RBS's Wealth Division

Tom Burroughes

6 May 2011

The “wealth” segment of Royal Bank of Scotland, which comprises Coutts, the UK private bank, and its sister international private banking arm, reported a rise in profits for the first quarter of this year from the same period a year ago, the London-listed group said today.

Operating profit before impairment losses stood at £85 million (around $139.4 million), up from £66 million a year earlier, RBS said in a statement.

Total income in the first three months of 2011 was £281 million, up from £255 million in the same period a year before.

The interest margin of the wealth segment was 3.45 per cent, compared with 3.42 per cent in 2010. Total employee headcount rose to 5,400 at the end of March this year, compared with 4,900 12 months earlier. Its cost/income ratio fell to 70 per cent from 74 per cent.

Assets under management at the end of March stood at £34.4 billion, a rise of 7 per cent from the end of December.

Explaining recent developments at the wealth business, RBS said: “In wealth announced a new set of goals and strategic plans, which have been accompanied by significant management change. The new strategy focuses on a narrower range of territories, balancing mature and growth markets, where the Coutts brand is strong and resonant. Wealth is already making progress in the UK with an increased focus on investment advisory services, while internationally cash management services are receiving increasing attention.”

“The new wealth strategy is underpinned by technology. A new IT platform, already in place within wealth international was launched in Adam & Company during Q1 2011 and will be rolled out to the rest of the UK businesses during the year. This new platform will enhance the customer service provided to wealth clients and allow for an integrated banking platform throughout the division. It is only the first of a number of planned technology investments to improve customer connectivity and take advantage of the growth opportunity the division represents,” it said.

At the overall group level, RBS posted a loss attributable to shareholders of £528 million in the first three months of this year, more than twice as heavy as the £248 million loss a year before. Total income shrank to £7.547 billion from £8.206 billion. The loss stemmed from factors such as fair value changes in the government-created Asset Protection Scheme and changes in the fair value of debt, the statement said.

RBS reported an operating profit of £1.053 billion in the first quarter of 2011, compared with a profit of £55 million in the fourth quarter of 2010 and a profit of £882 million in the first quarter of 2010.

The bank had a core Tier 1 ratio – a key barometer of banks’ financial strength – of 11.2 per cent, up from 10.6 per cent.

Impairments fell by 9 per cent during the quarter to £1.95 billion.