RBS reports first profit in 10 years

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Royal Bank of Scotland has returned to profit for the first time in a decade as it continues its recovery.

Chief executive Ross McEwan told the BBC it was "a really symbolic moment."

The bank, which is majority-owned by the taxpayer, made an annual profit of £752m compared with a £6.95bn loss the year before.

RBS still faces a potentially massive fine from the US Department of Justice over the sale of financial products linked to risky mortgages.

What happened to RBS?

RBS expanded rapidly in the boom years of the 2000s, and in October 2007 led a consortium to buy Dutch bank ABN Amro for a massive £49bn, one of the largest deals in financial services history.

However, the timing of this deal turned out to be unfortunate.

A crisis swept through the financial sector, property prices plunged, economies fell into recession and banks lost billions.

At the height of the crisis, in October 2008, the Treasury had to step in to bail RBS out for £45bn.

Since the bank has been trying to get itself back into financial health.

In 2013, Ross McEwan became chief executive, and he has turned the bank away from investment banking and towards UK High Street banking.

When will the taxpayer recoup its RBS investment?

By BBC economics editor, Kamal Ahmed

After nine years when accumulated losses totalled £58bn pounds – today a symbolic profit for RBS.

Does it mean the government can start planning more confidently about selling the 71% stake it holds on behalf of the taxpayer?

The fact the share price went down this morning by nearly 5% suggests not.

Investors are still nervous about the multi-billion pound fine the bank is expecting from the US.

At 269p, the RBS share price is still a long way below the 502p a share the government would need to break even on the billions of pounds it spent bailing out the bank a decade ago.

It has already sold some of its stake at a loss – and will have to continue on that path for a long period yet, in the hope that eventually the share price will rise above that 502p and, overall, a profit can be made.

Ross McEwan told me it would take three to five years before the government would have a "much smaller" level of ownership.

Selling the taxpayers' stake in RBS has proved a much tougher and longer process than anyone imagined a decade ago.

When will RBS resolve its US problems?

The sub-prime mortgage crisis came about after banks started giving high-risk loans to people with poor credit histories.

Risky mortgages would be packaged up with other loans, bonds, or assets, and sold on to investors as so-called mortgage backed securities.

RBS was one of the banks accused by the US Department of Justice of mis-selling these securities.

The bank had expected to settle the case in 2017, but is now hoping it will reach an agreement this year.

On Friday RBS set aside an extra £492m for US litigation, taking the total set aside for US court action around the sale of those products to £3.2bn.

The issue complicates UK government plans to start selling down its stake in RBS.

"We have been constantly hit with the sins of the past with conduct and litigation issues and I've been heavily restructuring the business to bring it back to the UK," Mr McEwan said.

What other issues does RBS face?

On Tuesday, after months of wrangling, MPs released a report by the financial regulator which said a unit of RBS mistreated thousands of small firms.

The Global Restructuring Group (GRG) was marketed as an expert service that could save a business, but according to the report took "inappropriate" action.

Mr McEwan said the report "did make for really tough reading".

"We did not get it right for customers at the time they needed us when their businesses were struggling," he said.

"We just didn't look after them well enough".

The bank has now put in place a complaints process overseen by a former high court judge, Mr McEwan added.

How does the bank perform on gender pay?

For the first time, RBS published the average pay gap between men and women in the bank, which it said was at 37.2%.

"Our gender pay gap reflects an under-representation of women at senior levels," the bank said in its annual report.

"That is not a satisfactory position and we know that we still have much to do to narrow the gap."

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