Royal Bank of Scotland (RBS) has bounced back into the black with an operating profit of £829m ($1.3bn) for the three months to end March.

In the year-ago quarter, RBS lost £1.5bn and ended fiscal 2012 with a fourth quarter loss of £2.2bn.

RBS was helped by a sharp reduction in impairment losses: they fell to £1.03bn in the first quarter, down by 24% from the same period last year.

Total assets continued to inch down and fell a further 7% in the past year to £1.3trn at the end of the first quarter.

Stephen Hester, CEO, RBS described the balance sheet as "substantially fixed," He added: "the operating profitability has come in quite strongly."

The results prompted speculation that the government may consider reducing its RBS stake (currently 82%)

Hester said the government could "start selling shares from the middle of 2014 on, to complete the recovery process in about a year’s time."

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