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RBS looks set to hit full-year profitability

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It has been almost a decade, but RBS finally looks set to post a full-year profit.

The bank, which is 71%-owned by the taxpayer, posted third quarter profits of £606m compared to a loss of £327m in the same period last year. It is the third successive quarter of profit, and caps an overall profit of £1.33bn for the year-to-date.

RBS added that it remains on track to achieve all of its 2017 financial targets. It said it expects to achieve full year profitability next year for first time since 2007.

Problems remain

However, The Share Centre analyst Ian Forrest said investors shouldn’t get too excited about the prospects for the group. He said: “These are good results from RBS today, beating market expectations, and some of the large legacy issues in the US have been settled. The market welcomed the news with a modest 2% rise in the shares. The group has outperformed the market so far this year but the large fine from the Department of Justice remains to be resolved and the UK government is unlikely to begin selling down its 71% stake in the bank until that’s done.

“We would still suggest that investors avoid the stock, as there are better opportunities to be had in the market. For investors interested in this sector, our preference is HSBC as it has remained a significant payer in difficult times and now there are clear indications that the group is starting to benefit from its restructuring programme.” The group currently lists RBS as a ‘sell’.

Earlier this week, Lloyds also reported a jump in third quarter profits, as costs associated with the payment protection insurance (PPI) scandal diminished. The group, which returned to private ownership earlier this year, announced pre-tax profits of £4.5bn, a 38% increase over the previous year. This was ahead of analyst expectations.

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