EDINBURGH-based Royal Bank of Scotland has reported a huge boost in its profits for the first half of the year but the state-owned bank says it may not meet its profit targets next year with Brexit cited as the reason for uncertainty.

RBS also unveiled a £1.7 billion payout for shareholders, and with the UK Government still owning the majority of shares, there will be a surprise £1bn windfall for the Treasury, as the group announced a special dividend of 12p per share alongside an ordinary interim payment of 2p per share.

The group warned of tough times ahead, however, attributed to uncertainty over Brexit, a warning which caused its shares to dip by more than 6%, further reducing the income the Government will get when it goes through with its declared aim of selling the shares back to the private sector in the lifetime of this government – although how long that could be is anybody’s guess. RBS has been mired in controversy ever since the Labour Government under Gordon Brown stepped in to buy the bank for £46bn after the financial collapse of 2008.

Since then the bank has endured a series of scandals in common with other major banks, and has had to set aside billions to settle the so-called historic scandals.

RBS also set out on a huge restructuring project under chief executive Ross McEwan who has announced his departure. Tens of thousands of staff have gone as RBS sold off international businesses and closed UK branches – the latter issue a particularly controversial point in Scotland.

RBS said it had achieved its highest half-year bottom-line profits in more than a decade, with attributable profits jumping 130% to £2bn.

Meanwhile, operating pre-tax profits outstripped forecasts, rising 48% to £2.7 bn.

The figures were boosted by the sale of its stake in Saudi bank Alawwal, which completed its merger with Saudi British Bank in June.

Attributable profit for the second quarter was up 35% to £1.3bn.

Return on tangible equity was 12.1% in the period, but the company warned that, due to the uncertain economic environment, it was not likely to achieve higher than this level in 2020. However it maintained its target in the medium term.

Costs were down by £173 million, with a target in place for £300m savings by the end of the year.

Net lending was up 2.5%, while the bank recorded £14.3bn in gross new mortgage lending.

Bank net interest margin slipped five basis points lower to 2.02% in the second quarter, as competitive pressures in the mortgage business took their toll.

RBS’s chairman Howard Davies predicted a further period of uncertainty particularly the prospect of a No-Deal Brexit.

He said: “The subdued outlook for interest rates is affecting all banks, global economic growth prospects are less favourable, trade tensions between China and the US continue to be strained ... and that’s also affecting market confidence.”

Soon to depart McEwan said: “Given the uncertain and competitive environment, we are focused on the areas we can control; costs are down, capital and liquidity are strong, and we continue to grow lending to the real economy.”

Donald Brown, senior investment manager at Brewin Dolphin, said RBS was now a very different bank from 2008.

He said: “While there are cautionary words around hitting some of it targets against the backdrop of Brexit, RBS appears to be in stronger shape. “

“There are plenty of positives in these results, but its UK focus and the government’s remaining stake will likely continue to weigh down the share price in the short term. The special dividend will provide a hard-earned £1bn boost to the Exchequer.”

No announcements were made regarding the hunt for McEwan’s successor.