Knight in shinier armour

28 February 2006 By Mike Verdin

The UK bank is raising its dividend and buying back shares for the first time since the NatWest bid. True, the buyback is a modest £1bn. But it still shows that RBS boss, Sir Fred Goodwin, is determined to cut the discount that has made RBS itself a potential target.

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Royal Bank of Scotland said that its earnings rose 16.7% to £5.4bn last year on revenues up 13.6% at £26bn. Provisions grew 7.4% to £1.7bn.

The Corporate Markets division raised revenues by 17.2% to £8.8bn and underlying pretax profits by 24% to £5.2bn. Provisions fell 32% to £340m.

The Retail Markets arm raised revenues by 6.9% to £8.2bn and underlying pretax profits by 3.5% to £4.2bn. In UK retail banking, revenues grew 5.1% to £5.4bn and pretax profits by 0.6% to £3bn. Provisions rose 23% to £600m.

Citizens, the US division, raised revenues by 43% to £3.2bn and underlying pretax profits by 47.3% to £1.8bn. Provisions grew 12% to £131m.

RBS also announced that it would buy back up to £1bn of its shares and raised its final dividend by 29% to 53.1p.

The immediate market reaction was to send RBS shares 4% higher to 1933p.

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