STATE-BACKED Royal Bank of Scotland has doubled quarterly profits.

RBS, which is 80 per cent owned by the taxpayer, said pre-tax profits lifted to £1.64bn from £826m in the same period last year.

The trading update was the first since the group announced it had fallen to an £8.2bn loss for 2013 and launched an overhaul to cut costs by £5bn in three years.

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RBS said it had seen a modest revival in lending volumes during the quarter, with improvements in UK retail and business banking while income from its markets business was lower as it shrunk its balance sheet.

Ross McEwan, chief executive, said the figures showed the great job it could achieve while in a steady state.

He added: "We still have a lot of work to do and plenty of issues from the past to reckon with."

However, there was no mention of any plans to start returning the taxpayer stake to the private sector, in contrast to the buoyant first quarter announcement in 2013 when RBS said the Government should be able to start the process within a year.

In its trading update, RBS said it was seeing increasing economic confidence in some areas and expected a modest increase in margin for the remainder of the year.

But it is likely to be hit by costs as part of its restructuring plan that are considerably higher.

Mr McEwan also indicated he would get round a Government veto on giving bankers bonuses of twice their salaries by making changes to ensure he could pay enough to hold on to top staff.