Coutts said assets under advice had grown strongly thanks to its RDR offering, while more broadly it continued to reap the benefits of its decision to streamline client-facing processes.
Quarter three versus quarter two saw the private bank deliver an operating profit that was £4m higher, though primarily this was driven by lower expenses on the back of investment into global platform infrastructure and reining in discretionary costs.
Moreover, UK repricing initiatives also paid off, Coutts said, but looking at 2013 versus 2012 the bank acknowledge its operating profit was 5% down.
Elsewhere, Coutts’ parent RBS offered a more downbeat update to investors.
RBS said it would set up a £38bn internal “bad bank” to deal with its toxic assets, and reported a third-quarter pre-tax loss of £643m.
RBS said the loss was largely due to a change in the value of its own debt, and Ross McEwan, RBS’ chief executive, said that as well as some pockets of progress the results had highlighted areas it still needed to work on.
“No-one is more frustrated by this gap between our potential and our performance than our own people,” he added.
Good bank/bad bank
McEwan took over from RBS’ former boss Stephen Hester roughly a year ago, and the bank’s new chief also used the results to address the much-talked about good bank/bad bank split.
McEwan said it was clear improvements within RBS’ balance sheet had been driven by a drop in impairments, or falls in capital, and as a single entity its balance sheet did not look as healthy as it should.
To address this McEwan said RBS had worked closely with the Treasury and its advisers to identified a “£38 billion pool” that would be a drag on performance.
These assets consume roughly 20% of RBS’ capital and are made up predominantly of most high risk assets. McEwan said these would form an internal bad bank and to allow RBS to deal with its toxic loans, by placing them in a separate run-down unit.
Reacting to the move, Chancellor George Osborne said that it would allow RBS to move in a new direction. Traders disgreed, though, and following the bank’s results its shares shed 3.6% on yesterday’s close, taking them down to 354.10p.
Investec analyst Ian Gordon recommended selling RBS shares ahead if today’s results, and followed up the bank’s announcement with a bearish note on the stock.
He said it was clear that any investor relief that RBS had avoided a full break up will have been tempered by the “significant shareholder value destruction” the measures rolled out by the bank.
Gordon argued that a faster run down of risky assets would trigger increased impairments in quarter four, and the impact on earnings could be “severe”.
