February 23, 2018 / 11:35 AM / 2 years ago

NatWest Markets makes Q4 loss as RBS returns to profit

LONDON, Feb 23 (IFR) - NatWest Markets made a £159m operating loss in its core business in the fourth quarter after a 10% fall in income from a year earlier as it suffered from the same “challenging market conditions” that hurt trading at bigger rivals.

It left NatWest Markets showing a slim £41m profit for 2017, compared with a £386m loss in 2016. That echoed a return to profit for its state-backed parent Royal Bank of Scotland, which on Friday reported its first annual profit in a decade.

NatWest Markets’ adjusted income at its core business was £284m in the fourth quarter, down from £314m a year ago. The unit made a £565m operating loss in the final quarter of 2016.

Rates revenues rose 15% in the fourth quarter to £144m and financing income was up 11% from a year earlier to £99m, but revenues from currencies slumped 35% to £102m.

For the year, NatWest Markets’ core revenues rose 9% on the year to £1.67bn, after an 18% rise in rates and 33% increase in financing offsetting a 15% decline in currencies revenues.

NatWest Markets also now includes most of the legacy assets that RBS used to hold in a capital resolution business, which it closed last quarter. Including those assets, NatWest Markets made a £977m loss in 2017 and a £1.9bn loss in 2016.

RBS swung to a £752m net profit in 2017 from a £7bn loss in 2016.

But the return to profit was bittersweet: it had hoped to settle with the US Department of Justice for alleged misselling of mortgage-backed securities, which some analysts estimate could cost the bank up to US$12bn. Resolving that issue still hangs over the bank - and its share price - and complicates the government’s plan to sell down its 71% stake. (Reporting by Steve Slater)

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