RBS reports £469m loss in third quarter

Royal Bank of Scotland (LSE: RBS.L - news) has reported a third quarter loss of £469m, setting aside £425m for litigation and conduct costs.

The lender, which remains 73%-owned by British taxpayers more than eight years after its £45.5bn bailout, has not made an annual profit since 2007.

This leaves the Government currently sitting on a £25bn-plus loss on its investment.

RBS's third quarter loss is compared with a profit of £940m in the same quarter last year, although that result was skewed by the sale of substantial businesses in the US.

Sky (Frankfurt: 893517 - news) 's City Editor Mark Kleinman said: "There's as much red ink splashed across these RBS numbers as there usually is."

But he added a positive note, saying: "If you strip out the restructuring costs RBS is still facing, the core bank actually recorded a profit, which suggests that, once it has got through all of its problems, there should be a profitable business at the end of it.

"But, of course, they are still going through all of the problems which led to the British taxpayer having to bail them out in the first place in 2008."

One of the main drivers of the loss is £469m of additional restructuring costs, largely from the group's extended struggle to sell its 300 Williams & Glyn branches.

RBS said it will miss an end-of-2017 deadline for this sale, which was a condition of its 2008 bailout, a failure that Kleinman said could leave the bank "facing another hefty fine".

The bank is thought to be in talks with a number of interested parties over the sale but it also said: "RBS is therefore in discussion with HM Treasury and expects further engagement with the European Commission to agree a solution with regards to its state aid obligations."

There is also the £425m set aside for litigation and misconduct, which includes settling legal cases in the US relating to the sale of residential mortgage-backed securities prior to the 2008 financial crisis.

Also, on Wednesday, Sky News revealed that RBS had been forced to set aside millions of pounds to settle legal action brought by major City shareholders.

The bank is facing at least five separate claims from sets of investors who allege that they were misled into buying shares in the bank in April 2008.

But, unlike rivals Lloyds and Barclays (LSE: BARC.L - news) , RBS did not record any provisions for repaying customers who were mis-sold payment protection insurance.

Chief (Taiwan OTC: 3345.TWO - news) executive Ross McEwan said: "We've said that 2015 and 2016 would be noisy as we work through legacy issues and transform this bank for customers.

"These results reflect that noise."

He added: "Our core business results were good, with a £1.3bn adjusted operating profit - our best quarter since 2014."

On Brexit, Mr McEwan said: "The economy is holding up but there is uncertainty.

"We saw a fall in mortgage applications but that's now back to normal.

"Time (Frankfurt: A11312 - news) will tell."

RBS shares were up by 5% in early trading.