Royal Bank of Scotland posts first half profit
Royal Bank of Scotland, the majority taxpayer owned banking operation, has today posted a £9 million profit for the first six months of 2010 compared to a £1 billion loss in the same period last year. However, all is not as it seems if you look below the surface.
While there is no doubt that Royal Bank of Scotland has turned around its core operations, much of the improvement was down to reduction in loan impairments which fell by 30% to just over £5 billion. However, loan impairments were slightly higher in the second quarter of 2010 because of the company's heavy exposure to the Irish market and the property sector in particular. It also seems that the company booked a £553 million gain on the redemption of some of the company's own debt.
While there is no doubt that the situation has improved compared to 2009 there is also no doubt that investors and the banking community remain cautious regarding the second half of 2010. The shares were up slightly in early trading although the short-term economic outlook in the UK, and other areas of the world, is starting to have an impact upon sentiment in the financial arena.
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