Royal Bank of Scotland eyes return to private sector

State-rescued Royal Bank of Scotland plans a return to the private sector next year following a massive restructuring programme, it said on Friday as it also announced a swing back into profit.

RBS chairman Philip Hampton said that the Edinburgh-based bank hoped to begin offloading the government's 81-percent stake from the middle of next year or possibly earlier.

RBS returned to profit in the first quarter with net earnings of £393 million ($610 million, 467 million euros) on a drop in bad loan provisions and after a hefty loss a year earlier, the lender said in a results statement on Friday.

Its profit after tax for the January-March period compared with a net loss of £1.545 billion in the first quarter of 2012 -- when the value of the bank's outstanding debt had significantly increased.

"These results show pleasing progress in delivering a strong and valuable RBS for all our stakeholders," the bank's chief executive Stephen Hester said in a statement.

"We expect to substantially complete the bank's restructuring phase during 2014. 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," he added.

Meanwhile in a video message on the bank's website, Hampton said:

"What we want to do is have a business that is performing well (...) enabling the government to start selling shares from, let's say, the middle of 2014 on. It could be earlier, that's a matter for the government."

The British state owns 81 percent of RBS after the bank was bailed out in the wake of the 2008 global financial crisis with £45.5 billion of taxpayers' cash, making it the world's biggest banking bailout.

Royal Bank of Scotland had been ravaged by its badly-timed consortium takeover of Dutch bank ABN Amro at the top of the market in 2007, just before the crisis struck.

In a bid to turn around its fortunes, management has axed more than 35,000 jobs over the past five years.

RBS on Friday added that it posted pre-tax profit of £826 million in the first quarter of 2013 compared with a loss of £1.514 billion a year earlier. Loan impairments dropped 20 percent in the reporting period.

But the bank's share price slumped 4.65 percent to stand at 293 pence in morning deals on London's benchmark FTSE 100 index, which was up 0.10 percent at 6,467.47 points.

"The shares have been slammed... as a headline profit figure masked an operating profit which was strongly shy of expectations," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

"The update does, however, display some signs of progress, with another decrease in impairments accompanying an improvement to the capital cushion, a pick up in loan demand implying some early signs of economic recovery and a further shift towards the smaller and more focused bank it wishes to become," Hunter added.

RBS last year posted its fifth-straight annual loss, with the lender hit by a vast accounting charge and fines as a result of the Libor interest rate-rigging scandal.