RBS soars on strong Q2 results

|By:, SA News Editor

Out with preliminary Q2 results a week early, Royal Bank of Scotland (NYSE:RBS) is ahead 12.7% premarket after reporting net profit of £230M vs. £142M a year ago. Helping along earnings was a £93M release from loan loss provisions vs. a £1.12B charge last year.

The bank recorded litigation and conduct charges of £250M in Q2 and says it expects higher cost for the full year.

"Let me sound a note of caution,” says CEO Ross McEwan. "We are actively managing down a slate of significant legacy issues. This includes significant conduct and litigation issues that will hit our profits in the months and years to come ... No one should get ahead of themselves here - there are bumps in the road ahead of us.”

Noting the beat is mostly attributable to loan loss charge reversals which is not sustainable, Citi's team views today's reaction as "overdone."

The official Q2 report is due on August 1.