Healthy profits at RBS

The announcement of bumper profits for one of the country’s biggest banks is unlikely, given the current mood, to provoke cheering in the streets. But today’s Royal Bank of Scotland results were good news not just for the bank, but for the public. The net first-quarter profit of £1.2 billion – three times the total in 2012 and far higher than most analysts’ predictions – suggested not just that RBS has benefited from the improving economic environment, but that the long, slow process of returning it to health might just be bearing fruit. In particular, the decision to contain its more toxic assets within an internal “bad bank” appears to have had the desired effect, enabling new growth to spring from the severed stump.

RBS will never regain its status as the world’s biggest bank: the current institution is a far humbler beast than Fred Goodwin’s grandiose, over-leveraged creation. But it is vital that it be returned to financial health – not just because of its role in providing credit, but because the public deserves to get back as much as possible of the £45 billion that was ploughed into its rescue in 2008. It sometimes seemed, as the losses and write-downs mounted, that the money was gone for good. As it is, there will probably be a shortfall; but the healthier RBS’s accounts, the less the loss will be.

This is why, as we have argued before, it is so vital to keep politicians’ noses out of the bank’s affairs. In particular, George Osborne’s ill-judged intervention on bonuses – apparently at the insistence of Nick Clegg – sent out a clear signal to the City that RBS was not a competitive home for world-class talent. Ross McEwan, its chief executive, insisted that “RBS will be a bank that does a great job for customers while delivering good returns for our shareholders”. The more ministers interfere, the longer it takes for “will be” to become “is”.

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