Shares in RBS were down on the FTSE 100 in morning trading after the part-nationalised bank said it had significantly cut its losses in the full year ended 31 December 2010.
Pre-tax losses in the full year period were £239 million, down from a £1.9 billion loss reported in the previous year. The group said it had made an operating profit of two billion pounds, following an operating loss of £6.2 billion the previous year.
The fall in losses came despite a decline in revenue, which fell from £31.9 billion in 2009 to £29.6 billion. Operating expenses fell only slightly from £15 billion to £14.4 billion.
RBS said that its impairment losses fell significantly in the period from £4.7 billion to £3.8 billion.
Stephen Hester, Chief Executive of RBS, said, "Two years on from the global financial crisis, RBS's recovery is ahead of schedule. In 2010 we made big strides in risk reduction and an early return to operating profits. We have much work still to do and there are significant obstacles still to overcome. We aim for continued progress this year."
Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented, "RBS has shown that its recuperation continues, with the shape of the latest version of the bank beginning to emerge.
"The bad loan provisions were significantly lower than the comparative period, whilst at an operating level the bank moved into profit after a torrid couple of financial years. The complex and lengthy disposal of non-core assets is still a work in progress, whilst return on capital and core ratio figures are relatively sturdy. The situation in Ireland has had a painful effect on the bank's numbers however, whilst in line with many of its global peers the investment banking arm has failed to inspire. In addition, the overall picture reflects a loss, even if this number is a significant improvement to 2008 and 2009. The shares will still be avoided by income seeking investors, with no return to a payment of the dividend yet in sight. The majority government stake will also continue to provide a technical overhang which could hinder share price growth.
"In all, RBS is clearly making progress from its former woes but remains a group in the grip of transition. The shares have had a chequered run of late, up 4% over the last six months for example as compared to an 18% rise in the wider FTSE100 in that period. Even though the strategy has been laid out and is being slowly followed, less patient investors will look for more immediate prospects elsewhere in the sector and the general market view of RBS is likely to remain at the current hold."
By 09:30 shares in RBS were down 2.90 per cent on the FTSE 100 to 45.95 pence per share.