James Moore: Reshaped RBS draws rave reviews – but is far from 'recovered'

Outlook Optimism and Royal Bank of Scotland have been mutually exclusive terms for so long that yesterday's statements from chief executive Stephen Hester had the feeling of coming from a parallel universe where his unlamented predecessor Fred Goodwin had remained an accountant.

After all, RBS has been through a long and sorry summer made hot only by the tempers of those unfortunate enough to hold the accounts that stopped working for several weeks thanks to antiquated computer systems that made Stonehenge look modern.

And yet there Mr Hester was at a banking conference baldly stating that RBS was "close to" becoming a "recovered bank". Should we all be knocking on the doors of the pharmacists who supplied him with the drugs he must have been on?

But hang on a second. Hard for those caught up in the account-blocking debacle to believe it (or to believe anything from a bank that made their lives miserable verging on impossible) but there are grounds for thinking that Mr Hester hasn't taken complete leave of his senses.

Behind the scenes RBS has been steadily normalising a business that was not just bad, but bizarre. Flights off fancy such as its aircraft leasing company, chain of pubs and various up market hotels have been sold off. There's still a Singaporean Casino in there, but not for long.

Meanwhile, after initially clinging on to the bank's grandiose investment banking operation like a gorilla with a Fyffes box in the middle of a banana famine, Mr Hester has bowed to the inevitable and swung the axe. What's more, the reshaped investment bank is garnering rave reviews in the City. An outbreak of sanity? Well, something close to it.

It might take a bit of sweet talking with the regulators but it shouldn't be too long before RBS is out of the Government's (bad) asset protection scheme as well.

Trouble is RBS is still haunted by the sins of the past. Mr Hester recognises that. "We have to all deal with the issues of the past and try and prevent them recurring and that will take a long time and, sadly, a lot of money," he said. Well, he's a banker after all. But the really sad part is the damage they have inflicted on so many people.

It isn't yet clear how much money compensating them is going to cost but, with writs pouring in, the best guess is "a lot".

And that suggests Mr Hester's optimism might be just a little premature: RBS will only really be considered as a "recovered bank" when it is able to consistently report positive earnings which aren't blown away by one-offs as a result of all those past misdeeds. Until the legacy of Mr Goodwin's misrule is finally and definitively purged.

That looks some way off. So does any chance of taxpayers making a return on the vast investment they have made into this still listing Titanic of the banking industry.

But given the year the bank and he has had, perhaps Mr Hester can be forgiven his optimism. Everyone needs to smile once in a while.