The wealth arm of Royal Bank of Scotland, which includes Coutts, the private bank, reported a rise in profit but a slight dip in AuM.

Royal Bank of Scotland today said its wealth division, which includes Coutts, its flagship private banking business which has a significant Asia presence, logged a pre-impairment profit of £77 million (around $130 million) in the first three months of 2014, up from £61 million a year ago and £70 million in the previous quarter.

UK-listed RBS said its operating profit in the wealth segment was £78 million, up from £56 million a year before; its net interest margin was 3.72 per cent, up from 3.55 per cent. A total of 4,500 people worked in the wealth division at the end of March this year, a fall from 4,900 a year earlier, the bank said in a statement.

The wealth division’s cost-income ratio fell to 72 per cent at the end of March this year from 75 per cent at the end of December and 78 per cent from a year ago; its return on equity was 16.9 per cent, up from 12.1 per cent a year before.

Total assets under management, excluding deposits, were £28.5 billion at end-March, a fall of 4 per cent from the end of last year and down 7 per cent 12 months earlier. Customer deposits were £36.6 billion, down 2 per cent from the end of March.

The fall in AuM was mainly caused by low-margin custody asset outflows and adverse market movements; deposits fell due to cyclical outflows as clients paid taxes and because of repricing action in the UK, the bank said. Lending was broadly unchanged.

Group
Across the whole of the group, operating profit for the quarter was £1.501 billion, up from £747 million a year earlier. The group, which is 81 per cent owned by the UK taxpayer after the-then Labour government bailed it out in the 2008 financial crisis, reported a pre-tax profit of £1.642 billion, up from £826 million.

The pre-tax profit figure, for example, was way higher than the average prediction of £300 million provided by analysts to Reuters in a poll of forecasts.

“RBS has made good progress towards the implementation of its new three segment business structure and will be reporting on this basis from Q2 2014 onwards,” the bank said. The segments will be: Personal & Business Banking, Commercial & Private Banking, and Corporate & Institutional Banking.

“RBS remains on track to deliver its target of £1 billion cost reductions in 2014. Incremental savings in the first quarter have been primarily tactical in nature, while the benefits of more strategic restructuring of the cost base will feed through later in the year. Restructuring costs are likely to be considerably higher for the remainder of the year than the rate implied by the first quarter,” it said.

“The ongoing conduct and regulatory investigations and litigation continue to create challenges and uncertainties for RBS, as for other banks. The timing and amounts of any further settlements or redress remain uncertain,” the bank warned.

Directorate changes

The bank, meanwhile, has previously announced that Nathan Bostock, group finance director, would be leaving the business and that Ewen Stevenson is to join RBS as an executive director and chief financial officer. Bostock will cease to be group finance director on 19 May and will step down from the board on 28 May 2014.

In line with his contractual arrangements and the circumstances of his departure, Bostock will not receive any compensation for loss of office. Bostock will continue to receive salary, pension and benefit funding up to the point his employment ceases on 18 August 2014.  No other remuneration payment will be made in connection with his departure.