An analysis of the operating profit provides a picture of what's going on inside a business that was on the brink of collapse when Stephen Hester arrived in October 2008. Hester split the out bank into core – continuing businesses – and non-core – businesses earmarked for disposal and other troublesome items – soon after he took the helm during the taxpayer bailout.
The core business posted operating profits of £7.4bn although these were eaten into by £5.5bn of losses in the non-core division to give an operating profit of £2bn. This improvement on the £6bn of operating losses reported in 2009 was described as a "step change" in performance by chairman Sir Philip Hampton.
Impairments were 33% lower in 2010 at £9.2bn, driven by a £3.7bn fall in impairments in the non-core division.
Within the core business two units – Ulster Bank and the insurance arm, which must be sold to comply with EU rules – are loss making. Ulster, caught up in the Irish economy's problems, lost £761m and insurance £295m, after a "disappointing year" when claims in the fourth quarter caused by the bad weather were £100m higher than normal.
Overall, though, the corporate and retail arms were improved, with operating profits up 66% to £3.8bn. This is more than the profits generated by the investment banking arm – known as global banking and markets – which dominated the results in 2009 with £5.7bn of operating profit. This has fallen to £3.4bn in 2010.
Within the corporate and retail arms, in the UK, retail banking profits soared from £229m to £1.4bn and in UK corporate profits improved to £1.4bn from £1.1bn.
Non-core operating results for the year were helped by a 41% drop in impairments and an operating loss of £5.5bn, compared with a loss of £14.5bn in 2009.
Parts of the Irish operations, Ulster Bank, are contained in the non-core business and taken together the impairments reached £3.8bn – a third of the group's total charges for bad debts – up from £1.9bn in 2009. Finance director Bruce van Saun said impairments in Ireland would remain at these levels for "a couple more quarters".
At the pre-tax line, the loss was £239m for 2010, compared with a loss of £1.9bn for 2009 after £1bn of integration and restructuring costs, amortisation of intangibles, the impact of strategic disposals, £99m for the UK bonus tax and an APS charge of £550m. Hester is two years into a five year plan to "restore the group to good health". The APS continues to be a drag on profits and he hopes to exit the scheme next year.
The £1.1bn loss reported by the bank also includes losses on discounted operations and RBS pointed out that if the APS cost had not been included, it would have broken even with a "slight" loss of £9m.
This year it will need to pay George Osborne's levy on balance sheets which it expects to cost between £350m to £400m. For the latest updates PRESS CTR + D or visit Stock Market news Today
No comments:
Post a Comment