RBS's shares pare gains as lender posts a £3.5bn loss

Shares in Royal Bank of Scotland (RBS) pared gains in London trade, after the lender reported a £3.5bn loss for 2014, down from a £9bn (€12.3bn, $14bn) loss in the previous year.

RBS's stock was trading 1.79% lower at 9.02am after gaining 1.91% in the opening minutes of trade on 26 February, after the firm said the loss was down to writing off £4bn from the value of its Citizens bank in the US.

A management presentation is scheduled for 9.30am followed by a fixed income call at 2.30pm.

Analyst's take

Ken Odeluga, senior market analyst at City Index, said in a note: "...Whilst narrower than the £9bn loss RBS reported in its last financial year, it's still likely to be a negative surprise because consensus forecasts pointed to the bank posting a £3.9bn adjusted profit.

"...There is some counterbalancing disclosure this morning—it includes that RBS is continuing to withdraw from riskier business activities, aiming to concentrate on its core domestic clearing and lending segments.

"It said it's exiting from 25 countries in the EMEA region. It's also reducing assets within institutional-focused businesses by 60% over 5 years.

"On the closely-monitored capital adequacy issue, RBS announced its Core Tier 1 ratio improved to 11.2% by the end of 2014 from 8.6% the same point a year before, and the bank now targets CT1 at 13%. These capital achievements and targets represent decent progress on the regulatory capital front, leaving regulators at least one less stick to beat the bank with.

"...Overall, whilst the loss is of course a key negative, and somewhat out of line with wider expectations, there are no further negative surprises. That for me leaves the share price reaction prospects today balanced.

"There's strong momentum in the stock at present. It seems likely it will remain reasonably buoyant."