Britain’s improving banking sector is becoming more apparent. The Royal Bank of Scotland has posted its most recent financial figures, highlighting a small net profit of just £9 million. Earnings unadjusted for tax commitments reach over £1.1 billion, although the bank’s status as a state-owned asset leaves it liable to taxpayers and due to repay a large tax bill.
RBS is one of several British banks to return to profitability in 2010. Partially state-owned Lloyds has reported a pre-tax profit of almost £1.6 billion this year – a significant increase from its large losses throughout 2008 and 2009. HSBC has improved its profits significantly too, adding almost sixty percent to its annual income sheet.
But the increase in profitability certainly isn’t all due to increased output. The bank’s new executive management team has carried out a series of aggressive restructuring efforts, laying off over 20,000 employees over the past two years. While industry analysts have praised RBS’s financial direction, labour unions have asked the bank’s management team to preserve jobs over the coming year.
The banking group has successfully reduced the amount of bad debt it has been holding, changing its own operations gradually as its customers have repaid their owed accounts. While advocates of business growth have criticised the bank for not lending to small companies, RBS has insisted that it needs to increase its lending potential gradually to prevent bad debts from being acquired.
RBS chief executive Stephen Hester understands that the restructuring plan could attract political commentary due to the bank being almost 85% state owned. Two years into its five-year corporate restructuring plan, it appears that RBS’s executive management team understands what is required to bring the formerly financially troubled retail bank back to long-term profitability.