Royal Bank of Scotland Group Plc saw its stock jump today, as the company brightened the projected results through years end, as an improving economic situation in the lenders top markets buoys margins.
According to its statement, RBS is to “significantly outperform” its initial projection that 2014 total impairments would reach as much as £1bn ($1.62bn), freeing up £800 million in cash allocated to cover the now-lowered expenses.
If the results, due to be published on October 31st, meet expectations, it would be the second time in a period of half of decade when the bank has a positive contribution from writing back provisions for bad loans.
“Rising Irish residential property prices combined with proactive debt management has resulted in lower arrears in Ulster,” RBS statement read. “The potential exists for further [reserve] releases in future, if market conditions continue to improve.”
The UK-based lender highlighted the stable operating performance of its RBS Capital Resolution division, lower debts in Ulster and lack of large one-off impairments as the main reasons for improving its projection of tightening the banks impairments.
It was not all rosy, however, as the company cautioned of upcoming fines on several cases could mount a significant total sum.
The bank needs “to get through those before we see a real path to pay a sustainable dividend,” Ross McEwa, CEO, RBS, said.
Royal Bank of Scotland Group Plc added 3.54% to trade at GBX374.20 per share by 9:26 GMT, marking a one year change of +3.97%. The company is valued at £41.28 billion. According to the Financial Times, the 25 analysts offering 12-month price targets for Royal Bank of Scotland Group Plc have a median target of £3.50, with a high estimate of £4.60 and a low estimate of £2.50. The median estimate represents a -3.15% decrease from the last price of £3.61.
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