The Royal Bank of Scotland Group plc
) is scheduled to report its first-half 2014 results on Friday, Aug
In the preliminary first-half 2014 update issued on Jul 25, this
foreign bank reported encouraging earnings for the six months ended
Jun 30, 2014. First-half 2014 profit from continuing operations
more than doubled from the prior-year comparable period.
Results were driven by lower loan impairment losses and reduced
operating expenses. Additionally, the results reflected higher net
interest income. However, reduced non-interest income was on the
Repositioning of business fundamentals to withstand any further
crisis remains the trend of non-U.S. banks in the quarter, which
includes RBS. Defensive actions like limiting expenses are still in
place and focus on non-interest income has increased to some
Notably, RBS planned to scale down its interest-rate trading
business, which recently lost its competitive edge. Escalation in
regulatory as well as operating costs have squeezed the
profitability of this unit and forced the banking behemoth to take
such a decision.
Further, RBS has been embroiled in several lawsuits and
investigations. As a result, the company might have kept additional
reserve for litigation expenses, which would dampen the bottom line
to some extent.
The Federal Reserve's stricter capital rules for foreign banking
organizations (FBOs) sizably operating in the U.S. could cripple
their balance sheet further. Anyway, amid several litigation issues
and internal inefficiencies, this foreign bank is striving hard
through restructuring initiatives that focus on building capital
levels to achieve operational efficiency and reduce risk-weighted
Management expects first-half 2014 results to reflect impressive
operating performance, attributed to favorable credit conditions
and robust results from RBS Capital Resolution. Profit before tax
is expected to be £2,652 million, up from £1,374 million in the
prior-year period, with operating profit of £2,601 million, up from
£708 million in the prior-year period.
RBS currently carries a Zacks Rank #1 (Strong Buy).
Other foreign banks that are expected to release results in the
coming days include Itau Unibanco Holding S.A. (
), Royal Bank of Canada (
) and HSBC Holdings plc (
). HSBC will report second-quarter 2014 results on Aug 4 and Itau
Unibanco on Aug 5, while Royal Bank of Canada is scheduled to
report its third-quarter fiscal 2014 (ended Jul 31) results on Aug
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