RBS improves efficiency to achieve profit growth

The Royal Bank of Scotland Group has reported a growth in operating profit in the second quarter of 2010, helped by technology cost savings.

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The Royal Bank of Scotland Group has reported a growth in operating profit in the second quarter of 2010, helped by technology cost savings.

The bank said that group costs declined by seven percent in the period, to £4.1 million, which it said was “principally driven” by a reduction in staff costs, but also “reflected continued efficiency gains from Business Services”.

RBS’s Business Services division provides technology, property and operational services to the group’s customer-facing divisions. The bank reported a five percent fall in its technology and operations costs.

The cost reductions helped RBS Group achieve a quarterly profit of £869 million, up from £713 million in Q1 2010.

However, RBS’s results are clouded by the threat of further redundancies, in addition to the 500 job cuts it announced for its wealth management division in June, and the 2,600 job losses in its insurance division in May.

“While the group has already taken a number of difficult restructuring decisions that have affected its staff, further steps are planned in pursuit of establishing an efficient and competitive cost base.

“As with all such decisions to date, the focus will be on ensuring that the impact on staff is handled appropriately and that everything possible is done to minimise compulsory redundancies,” the bank said in its latest financial report.

Meanwhile, in its UK retail division, RBS said that process re-engineering efficiencies win its branch network and operational centres have helped to reduce the division’s costs by three percent lower than in Q2 2009. The bank also said that the division is “benefiting” from investment in process improvements and automation.

The RBS Group was recently fined £5.6 million by the Financial Services Authority (FSA) for failing to have adequate systems and controls in place to screen transactions under Money Laundering Regulations.

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