No end in sight for taxpayer as RBS losses widen in Q3

The bailed-out Edinburgh lender said the July-to-September period was again crippled by “legacy issues” continue to overshadow its performance.

Once restructuring costs and provision for litigation were excluded, the bank stressed that it had made an adjusted quarterly operating profit of £1.3 billion.

The third-quarter loss compares badly with the same period last year, when RBS posted a profit of £940 million – although this was down to a one-off injection from proceeds received as a result of the sale of US subsidiary Citizens.

The still 73 per cent state-owned bank’s latest performance did not include new provision for costs arising from mis-selling of Payment Protection Insurance (PPI), as other high street giants Lloyds and Barclays have already done in their results this week.

Instead the contingency for costs have been put in place in anticipation for fines coming from US authorities over the mortgage-backed securities scandal surrounding the 2008 financial crisis that led to RBS’s own $45 billion taxpayer bailout.

RBS chief 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.

“Our core business results were good, with a £1.3 billion adjusted operating profit, our best quarter since 2014.

“The core business has now delivered on average over £1 billion in adjusted operating profit for the last seven quarters.”

RBS said it had achieved cost reductions of £695 million in the first nine months of the year and was on target to meet its target of an £800 million reduction by the end of this year.

“Meanwhile, the bank’s longer term targets have also been temporarily shelved in the face of its ongoing challenges.”

Any prospect of a return to dividend payments was dismissed: “The timing of returning excess capital to shareholders through dividends or buybacks remains uncertain,” RBS said.

On this week’s news that Glasgow-based Clydesdale Bank was lining up a deal to buy the tranche of 300 RBS branches that it has to sell to comply with the EU-imposed conditions of its bailout, the bank said any sale would not happen by the already extended deadline of the end of 2017.

RBS declined to comment on Clydesdale advances, saying only that it was “talking to a number of interested parties”.

The full company announcement and annual report can be found here.

Meanwhile, the RBoS Shareholder Action Group, one of a number of RBS shareholder groups attempting to sue the bank over its 2008 rights issue immediately before its record bailout during the financial crisis, has responded to reports that RBS could be about to settle with one group of corporate shareholders over the affair.

RBoS Shareholder Action Group said it will continue its £1.25 billion compensation claim on behalf of investors who lost money after subscribing to the shares.

A spokesman at the RBoS Shareholder Action Group said: “We note reports in the media that other shareholder group may be close to settling their claims against RBS. We wish those claimants well, but today’s reports make no difference to our action group’s litigation against the bank.”

As well as retail investors, RBoS represents a number of UK local authority pension funds and financial institutions, including Bank of America Merrill Lynch, Abbey Life, Axa, Aberdeen Asset Management and Lloyd’s of London.

RBS declined to comment.

Former RBS chief executive Fred Goodwin will be among the defendants when the trial is held at the High Court in London on March 6 next year.

Today’s results and statement also prompted former business customers of the bank to renew their claims against RBS over the conduct of its now defunct global restructuring group after the bank’s decision not to set aside any money to pay them compensation.

A delayed report into their allegations is expected to be published by the Financial Conduct Authority by the end of the year.

James Hayward, chief executive of RGL Management, which is bringing a class action against RBS on behalf of businesses over the affair, said: “RBS continues to mislead the market by not making adequate provisions to meet pending legal challenges. RBS is well aware of the businesses they destroyed through the actions of GRG and they are also aware that RGL will shortly be bringing a multibillion-pound claim to finally bring redress and compensation for the members of this action.”