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RBS signals resilience with stronger capital in third quarter

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Royal Bank of Scotland Group signalled it's in a better position to handle legacy issues after posting stronger than expected capital ratios in the third quarter.

[LONDON] Royal Bank of Scotland Group signalled it's in a better position to handle legacy issues after posting stronger than expected capital ratios in the third quarter.

The Edinburgh-based lender's common equity Tier 1, a measure of financial resilience, jumped to 15.5 pe rcent in the period, beating the 15.3 per cent average estimate of four analysts surveyed by Bloomberg News, it said in a statement on Thursday. It posted a ratio of 14.8 per cent at the end of June.

"Our core bank continues to generate strong profits and we remain on track to hit our financial targets," chief executive officer Ross McEwan said in the statement.

Four years into his tenure, Mr McEwan is making headway in turning around the recipient of the biggest banking bailout during the financial crisis.

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But the firm is still hampered by legacy misconduct charges and needs to settle with the US Department of Justice over its mortgage-bond probe before it can return dividends and entice investors to buy the government's stake.

RBS has said that it would plan to pay dividends, once uncertainty over legacy issues had been removed. The bank reiterated that it will be profitable in 2018.

Chief financial officer Ewen Stevenson has also said he hopes to reach an RMBS settlement with the DOJ this year.

Mr McEwan made some steps forward in the bank's return to normality this year, with an agreement in July to pay US$5.5 billion to the US Federal Housing Finance Agency to settle a lawsuit alleging RBS sold faulty mortgage bonds to Fannie Mae and Freddie Mac from 2005 to 2007.

The bank has also gained approval from the European Union for an alternative plan to boost competition after failing to sell its Williams & Glyn unit, a condition of its 2008 bailout.

The bank's adjusted operating profit, which excludes certain one-time items, fell 6 per cent to about £1.25 billion (S$2.25 billion) from £1.33 billion in the same period a year earlier. That beat an approximate £1.04 billion estimate of four analysts surveyed by Bloomberg News.

BLOOMBERG