LONDON: Royal Bank of Scotland Group reported its first full-year profit since 2007 on Friday, but the symbolic moment was bitter-sweet for the bank which had hoped to get a multibillion-dollar misconduct charge out of the way instead.
The bank's 752 million pound ($1.05 billion) profit beat a company-provided average of analyst forecasts for a 592 million pound loss. But many had included in their estimates hefty provisions for a settlement with the U.S. Department of Justice for mis-selling by RBS of toxic mortgage backed securities.
Some analysts put the charge as high as $12 billion. RBS had hoped to settle the case in 2017. If it had, this would have resulted in the bank's 10th consecutive annual loss. Since 2008, RBS has booked 58 billion pounds in losses.
The bank did not provide an update on the timing of the settlement, its last large remaining legacy issue.
Chief Executive Ross McEwan said in a statement this was out of the bank's control but the bank could nonetheless begin to think about resuming payments of dividends or buying back its shares.
"With many of our legacy issues behind us, the investment case for this bank is much clearer and the prospect of returning any excess capital to shareholders is getting closer," he said.
But for market watchers, the bank's symbolic return to profit after its 45.5 billion pound bailout during the height of the financial crisis will be overshadowed by this last large, looming fine for crisis-era misconduct.
The issue weighs on RBS's share price and complicates the government's plan to sell down its 71 percent stake in the bank.
RBS took 764 million pounds of provisions in the fourth quarter for conduct issues like its mis-sale of payment protection insurance, which came in at 175 million pounds.
Restructuring costs were 531 million pounds for the quarter and 1.6 billion for the entire year.
Overall, the bank continued to drive down costs - a strategic aim that has seen it shed billions of pounds from the bank in recent years.
In 2017, it beat its overall cost reduction target of 750 million pounds, taking out 810 million pounds overall.