By Iain Withers and Lawrence White
LONDON/EDINBURGH (Reuters) - Royal Bank of Scotland (LON:RBS) reported lower first quarter profit on Friday, hurt by intensifying competition and Brexit uncertainty, while its investment bank also registered poor returns.
RBS shares fell more than 5 percent in early trading, with the results coming a day after its Chief Executive Ross McEwan announced plans to leave within a year, kickstarting a new phase for the state-controlled lender.
RBS reported a net profit of 707 million pounds for the period, which was above expectations of 546 million pounds according to a company-provided average of analyst forecasts, but down from 808 million pounds the previous year.
The bank blamed tough trading conditions in the UK for the profit drop, particularly in the highly competitive mortgage market.
The pressure ate into the lender's net interest margin - a key measure of underlying profitability - which declined 6 basis points quarter-on-quarter to 1.89 percent.
The bank said ongoing uncertainty over Brexit would likely delay borrowing by business customers, making growth more challenging.
RBS's downsized investment bank performed badly over the period, with income down 41.4 percent on the previous year.
McEwan said RBS was still committed to its investment bank in a call with reporters, saying its performance was in "the middle of the pack" amid poor results for rivals across the banking industry.
McEwan added that he believed the numbers were a “solid set of results against an uncertain economic and political background”.
RBS launched a global hunt for a successor to McEwan on Thursday, with top RBS executive Alison Rose tipped as the leading candidate.