Royal Bank of Scotland (RBS) has returned to profitability after it posted a pre-tax profit of £826m in the first quarter of 2013.
The banking group said that it had made “pleasing progress” as group operating profit jumped 50% on the previous quarter to £829m in the first three months of 2013.
The latest results compared to a pre-tax loss of £2.2 billion in the fourth quarter of last year.
Group loan impairment losses fell by 20% from the same period in 2012, which RBS attributed to a £154m improvement in Ulster Bank as the economic environment in Ireland continued to stabilise.
In its UK retail division, loan impairments were down £75m on the first quarter a year ago as a result of lower default rates.
RBS announced that core lending to small and medium-sized enterprises (SMEs) rose 1% on the previous quarter to £34 billion.
During the first quarter of this year, the bank offered more than £1.5 billion of discounted loans to nearly 8,500 SMEs and over £327m of mortgages to borrowers in association with the government’s Funding for Lending Scheme (FLS).
But the group said that its “strong” liquidity position meant that it did not need to draw on the FLS in the quarter.
Group chief executive Stephen Hester said that he expects the bank’s restructuring phase to be completed in 2014.
He added: “We are seeing the start of a pick-up in loan demand and have a strong surplus of funds ready and available to fully support economic recovery.
“Across the group we are working hard to improve what we do for customers and to better position the bank for future growth.”
In the first three months of 2013, RBS confirmed that in excess of £13 billion of loans and facilities were offered to UK businesses, including £8 billion to SMEs, while it renewed nearly £7 billion of overdrafts, of which £2 billion was for SMEs.
It revealed that the average interest rate charged on SME loans declined to 3.88% in the first quarter, from 3.93% in the prior quarter and 4.14% a year earlier.
The bank said that it continued to monitor its provision for mis-sold payment protection insurance (PPI) redress, although no further charge was made during the quarter.
But the group increased its provision for its interest rate hedging products (IRHPs) compensation scheme by £50m in the first quarter of 2013 after the financial services regulator identified “serious failings” in the way some banks sold IRHPs to small businesses.