Royal Bank of Scotland sets aside 'Brexit' pot

Royal Bank of Scotland on Friday announced a 14-percent rise in quarterly net profit but warned of a "more uncertain outlook" as Britain's struggles to strike a Brexit deal. Profit after tax rose to £448 million ($574 million, 505 million euros) in the third quarter to September compared to the same period in 2017, RBS said as it continues to recover after a record government bailout a decade ago at the height of the financial crisis.
RBS announced also that it had set aside an additional £100 million to cover bad loans, "reflecting the more uncertain economic outlook". Analysts reckoned this clearly referred to Brexit uncertainty following recent warnings by RBS chief executive Ross McEwan, who earlier this month said that a no-deal Brexit risks sending the British economy into recession in 2019.
"RBS has taken a Brexit blow of £100 million, an impairment of its assets to reflect what it believes is greater economic uncertainty," said Laith Khalaf, senior analyst at stockbroker Hargreaves Lansdown. "This serves as a reminder that the bank's fortunes are very heavily influenced by the domestic economy."
The bank's share price was down 4.5 percent at 224 pence in midday deals on London's benchmark FTSE 100 index, which was one-percent lower overall. "Shareholders were spooked by the fact the bank set aside £100 million as a precaution regarding Brexit," said David Madden, analyst at CMC Markets UK. "The Dutch regulator confirmed the finance house can service its EU clients from its Amsterdam office after the UK leaves the EU, and that at least provides some assurances to shareholders."
The bank is planning for the worst amid increasing worries that Britain will exit the European Union in March without a deal in place with Brussels.
McEwan has previously noted that faced with Brexit uncertainty, RBS lending had become more cautious while at the same time companies have delayed investment decisions.
The lender remains majority-owned by the British government after it was saved with £45.5 billion of taxpayers' cash at the height of the global financial crisis in 2008.
Britain in June resumed privatisation of the Royal Bank of Scotland and the Conservative government led by Prime Minister Theresa May is seeking to sell two-thirds of its stake for roughly £15 billion over a five-year period.
RBS was fined $4.9 billion by the US Justice Department over its role in the subprime housing crisis which sparked the 2008 meltdown.