RBS posts £153m first-half loss

The Edinburgh-based lender cited continuing legal impairments and customer compensation payouts as well as the cost of a drastic restructuring strategy for the figures to the end of June.

The disappointing result compares with a profit of £1.43 billion recorded for the same period last year.

Net profit for the three months to the end of June, meanwhile, rose to £293m.

RBS was one of six banks fined a total of about £2.8bn for failing to stop traders trying to manipulate currency markets last year and has already paid £399m in fines to US and UK regulators over the foreign exchange (forex) market rigging scandal and in May, RBS and Japanese bank Nomura were ordered to pay $806 million between them for making false statements when selling mortgage-backed bonds to US agencies Fannie Mae and Freddie Mac.

Costs the Forex scandal were £334 million, while £506 million relate to the mortgage-backed securities litigation and £157 million is for packaged bank accounts, the bank said.

RBS said it has also set aside £1.3 billion for further lawsuits and customer recompense, while another £459 million was earmarked mainly for litigation costs in the second quarter.

Costs relating to litigation and conduct were just £250 million in 2014.

To date, redress and administrative costs resulting from mis-sold payment protection insurance total £3.8 billion.

Meanwhile, restructuring costs almost tripled this year after the need to cleave off the Williams and Glyn business as a condition of RBS’s 2008 government bailout, while the price of restructuring the corporate and institutional division also impacted performance.

The bank said restructuring costs had risen to £1.5 billion during the first six months of 2015, compared to just £514 million over the same period last year.

The bill also included writing off £606 million relating to “intangible software”.

Chief executive Ross McEwan has been implementing the plan to retreat back to domestic retail banking from the global investment enterprises that consumed the bank prior to the financial crisis and this week the bank announced it is to sell-off a further £2.2 billion worth of shares in US business Citizens.

By 2019 the total cost of restructuring will be around £5bn, the bank estimated.

Total income fell to £8.7bn from £10bn last year. The bank’s overall £153m loss compares to a profit over the same period last year of £1.4bn.

Most of those are likely to arise from sales of mortgage-backed securities in the US, said the bank.

Outgoing RBS chairman Philip Hampton said: “The decisions to sell or run-off significant parts of the business while investing in our core customer franchises has meant we are better positioned to deal with the constraints of structural regulatory reform, notably ring-fencing.

“Of course there are still some obstacles to overcome especially the resolution of outstanding conduct issues, including the investigations into our sale of residential mortgage-backed securities in the US between 2005-07, and the investigation by UK authorities into the bank’s approach to distressed businesses.

He added: “Judging the ultimate scale of conduct costs remains extremely challenging.”