RBS Prepares to Sell Shares as Net Profit Surges

LONDON - Royal Bank of Scotland signaled that it was moving closer to privatization on Friday as the bank reported its first quarterly profit since 2011.

The bank, which is 81 percent owned by the British taxpayer after receiving a multi-billion dollar bailout during the financial crisis, said net profit in the three months through March 31 was £393 million ($611 million), compared to a £1.5 billion loss in the same period last year, beating analysts’ estimates. The firm benefited from a £249 million one-off gain on the value of its own debt.

Since 2008, R.B.S. has been slashing assets, reducing costs and trimming its exposure to risky trading activity in a bid to boost its profitability, and return taxpayer funds.

The firm, based in Edinburgh, plans to sell a stake in Citizens Financial Group, the American lender it bought in 1988, while it also has announced the listing of part of its British branch network and has sold shares its local insurance unit, Direct Line.

The bank’s top executives said on Friday that the restructuring would be mostly complete by next year, which would allow the British government to start reducing its holding in R.B.S.

“What we want to do is have a business that’s performing well for its customers so we can write a prospectus with the government enabling the government to start selling shares from the middle of 2014,” RBS’s chairman, Phillip Hampton, said. “It could be earlier, that’s a matter for the government.”

The bank’s chief executive, Stephen Hester, told reporters on Friday that he had not held recent discussions with United Kingdom Financial Investments, the government entity created in 2008 to recover taxpayers’ investments in both R.B.S. and Lloyds Banking Group which had to be bailed out during the financial crisis.

The R.B.S. head added that the initial price of the shares may below what the British government paid for them in 2008, but added that he expected the average share price to be above the government’s 407 pence-a-share break even point.

“Because of the size of the state shareholding in R.B.S. and Lloyds, selling these shares will take a number of years,” Mr. Hester said on Friday. “The average sale price will likely be in excess of what was paid.”

Shares in R.B.S. fell 3.6 percent, to 297 pence, in early morning trading in London on Friday.

As part of its restructuring, the British bank said that it had continued to reduce its investment banking division in the first quarter of the year, while also setting aside fewer funds to cover delinquent loans.

After an international expansion before the financial crisis, R.B.S. is refocusing its efforts on retail and commercial banking, which now generates the lion’s share of the firm’s quarterly pretax earnings.

“The core franchise value of one of the dominant U.K. retail and wholesale banks is coming to the fore,” Sanford Bernstein analysts said in a research note to investors on Friday.

The bank’s chief, however, warned that the sluggish British economy still weighed on earnings, and that the firm’s restructuring was not yet complete.

“We are running hard to stand still,” said Mr. Hester. “There’s no momentum in the profits until the economy recovers.”