RBS falls on 'low-quality', 'underwhelming' earnings


Shares of Royal Bank of Scotland were down almost four percent in early trading on Friday after the bank posted first-half earnings described by analysts as "low-quality" and "underwhelming".

RBS said it made a pretax profit of 1.4 billion pounds ($2.1 billion) in the six months to the end of June, compared to a loss of 1.7 billion in the first half of 2012. One analyst described the results as "underwhelming."

"Despite the CEO appointment, the bank's strategy- and credit spreads - will remain in a state of flux until the government-commissioned report into the merits of splitting the bank into good and bad parts is published in the autumn," Michael Symonds, a credit research analyst at Daiwa Capital Markets.

Analysts at Citi said they saw the results as "low-quality". "The deterioration in underlying core profitability could drive further consensus earnings downgrades," they said.

The group also named Ross McEwan as its new chief executive.

McEwan had been widely tipped to get the job to replace Stephen Hester , who was ousted by the government in June, and will be tasked with completing RBS' restructuring and ensuring its shares rise above the government's break-even price so that its stake can be sold.

New Zealander McEwan, 56, joined RBS as CEO for U.K. retail in September fromCommonwealth Bank of Australia and is considered a safe, politically acceptable choice who will increase the bank's focus on retail and commercial banking. He is expected to continue slimming down its investment bank, which many politicians and regulators want.

He will be paid an annual salary of 1 million pounds, less than the 1.2 million Hester received. McEwan said he did not want to be considered for an annual bonus for the remainder of 2013 or for 2014.

The bank made its first two consecutive quarters of profit since 2008, when it needed a 46 billion pounds bailout from the taxpayer, which left the government with an 81 percent stake.

It said its capital strength continues to improve and expects to reach a core capital ratio under full Basel rules of more than 9 percent by the end of this year.

It took an extra 185 million pound provision to compensate customers for the mis-selling of payment protection insurance , taking its total bill to 2.4 billion pounds.

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