RBS reports profit for the first quarter of 2017

The lender posted a £259m profit for the first three months of 2017, recovering from a near £1bn loss in the same period last year

RBS was bailed out with £45bn of public money at the height of the financial crisis in 2008 (Reuters)

Cash-strapped Royal Bank of Scotland posted a £259m profit for the first three months of 2017, recovering from a near £1bn loss in the same period last year.

After stripping out fines and settlements, the bank reported that its core operating business made a profit of £1.3bn in the quarter to the end of March, up slightly from just over £1bn last year.

RBS was bailed out with £45bn of public money at the height of the financial crisis in 2008, with the Treasury taking a 72 per cent stake, which it has kept ever since.

The shares were bought at 502p per share, more than double the price they have been trading in recent weeks.

Last week, Chancellor Phillip Hammond said people should “live in the real world” and accept that the Government could sell its stake in the ailing bank at a loss.

In February, the bank – which has been dogged by vast legal costs and compensation bills – set aside another £5.9bn to pay for past wrongdoing.

Chief executive Ross McEwan at the time announced a major cost-cutting drive involving staff cuts and branch closures.

On Thursday, the bank said that it had reached an out-of-court settlement with a group of shareholders who alleged they were misled during a £12bn cash call in 2008.

The bank had previously been warned that it could face an inquiry by the Treasury Select Committee over its decision to spend millions of pounds of taxpayers’ money defending its former disgraced chief executive Fred Goodwin in relation to that issue.

RBS had expected to spend £125m defending the civil lawsuit, including £6.5m already paid for the legal fees of Mr Goodwin and his fellow executives, including former chairman Sir Tom McKillop.

The case is due to come to court on 22 May, with Mr Goodwin set to give evidence in person on 8 June, the same day as the general election.

Additional reporting by wires