Gross new mortgage lending for UK Personal and Business Banking (UK PBB), which accounts for the main bulk of RBS’ lending in the UK, stood at £31.0bn against £31.9bn in 2016.

In the same period, market share of new mortgages fell from 13% in 2016 to 12% in 2017, with stock share rising from 9.7% to 10%.

Net lending for UK PBB increased by £9.0bn, or 5.9%, to £161.7bn.

Meanwhile, customer deposits increased by £10.6bn, or 6.2% to £180.6bn.

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On a wider view of the group, gross new mortgage lending across UK PBB, Ulster Bank RoI, Private Banking and RBS International (RBSI) dropped from £35.8bn in 2016 to £33.9bn in 2017.

Nevertheless, RBS posted a statutory profit of £752m for 2017 – the bank’s first full year of profitability in a decade.

Between 2008 and 2016, RBS posted consecutive losses amounting to £58.4bn, with a £7bn loss posted in 2016.

Total income for 2017 rose 4.3% to £13.1bn compared to £12.6bn, while operating expenses fell 36% to £10.4bn – largely driven by falls in litigation and conduct costs from £5.9bn in 2016 to £1.3bn in 2017.

RBS also revealed a 37% gender pay gap in its results – one of the largest so far reported within the financial services industry.

 

The year ahead

Among looming challenges such as Brexit and continued economic uncertainty in the UK, RBS said it will be putting heavy emphasis on technology investments, which it sees as one of the biggest risks to its business.

The report said that developments in UK financial services, especially the introduction of disruptive technology “may impede the group’s ability to grow or retain its market share and impact its revenues and profitability, particularly in its key UK retail banking segment”.

As such, RBS chief executive Ross McEwan announced plans to invest £1.5bn in efficiency-related projects, with £800m on innovation and digital.

Among the products will be improvements to Cora, an artificial intelligence (AI) chatbot that RBS built in conjunction with IBM.

“The opportunities created by greater simplification and automation, in terms of improved controls, cost reduction and a better customer experience, are significant for this bank,” said McEwan.

He continued: “Through digital innovation we will serve customers more efficiently, be more responsive to their needs and at the same reduce costs in the business and build a more solid control environment.”

“As the number of our legacy issues reduces, and our business performance improves, the investment case for this bank is clearer, and the prospect of us rewarding our shareholders is getting closer,” McEwan added.

 

Stay of execution

Laith Khalaf, senior analyst at Hargreaves Lansdown, commented: “RBS has broken its ten year duck and managed to squeeze out a profit in 2017, thanks in large part to a big fall in litigation and conduct costs.

“This is a stay of execution rather than a pardon however,” Khalaf continued. “Two very big shadows still loom over RBS. One is the impending fine from the US Department of Justice, which is going to take a big slice out of the bank’s 2018 profits. The other is the large taxpayer stake, which has to be sold off at some point.”

The multi-billion pound Department of Justice case may be settled in 2018, though RBS stressed that it had no control over the timing of the resolution.

RBS reported £764m provision in Q4 2017 for litigation costs, which included £442m placed towards US mortgage suits, and £175m towards UK payment protection insurance mis-selling.

Separately, the bank was accused in a report published by the Treasury Committee of “disgraceful” and “endemic” mistreatment of struggling small businesses during the financial crisis.

Currently, RBS is majority-owned by UK taxpayers, who have a 71% stake in the bank.

“All in all, it’s been a tricky but momentous year for RBS, in which the bank has put to bed many of the legacy issues which have hampered performance since the financial crisis,” added Khalaf.

At the time of writing, RBS shares had fallen 4.26% since trading began.