RBS swings to a loss after £900 million PPI hit

Royal Bank of Scotland has tumbled to a loss in the third quarter after taking a £900 million hit for payment protection insurance (PPI) claims.

The part-nationalised lender reported pre-tax operating losses of £8 million for the three months to September 30, down from £961 million a year ago.

It posted attributable losses of £315 million, against profits of £448 million a year earlier.

Shares dropped more than 2% after the results.

RBS – still 62% owned by the Government – blamed losses on the £900 million bill for PPI following a last-minute surge in claims ahead of the August 29 deadline, as well as a “particularly challenging” quarter for its investment banking arm.

Despite the third-quarter losses, RBS said it remained on track for full-year expectations in “uncertain times”.

But it sees a relapse into the red after a robust first half, when it posted its highest interim profits in more than a decade and delivered a £1.7 billion special dividend payout for shareholders, including the taxpayer.

The figures mark the last for boss Ross McEwan before he hands over to the lender’s first female chief executive.

Mr McEwan leaves on October 31, paving the way for Alison Rose to make history as the first woman to run one of Britain’s biggest high street banks.

Chief financial officer Katie Murray said: “These results demonstrate our solid underlying performance in a tough operating environment.

“We have seen strong growth across the business and our sustained high levels of capital and liquidity mean we are well positioned to support our customers in these uncertain times.”

The PPI bill was at the top end of the £600 million to £900 million range given by RBS last month when it cautioned over higher-than-expected claims ahead of the deadline.

Ms Murray said she would be “brave” to say the latest PPI charge draws a line under the saga – saying it was the group’s “best estimate” to cover the cost of claims.

RBS said it was also seeing some signs of strain in the economy, with large firms holding back on investment amid Brexit uncertainty.

It also noted a slight increase in retail customers falling behind with their repayments over the past year, though it said this had started to flatten out.

The figures lay bare a dire quarter for the investment banking division, with NatWest Markets slumping to a £193 million operating loss, from an £87 million profit a year earlier after income plunged 44% to £184 million.

RBS saw a depressed bond market knock income in its rates business.

Gary Greenwood, a banking analyst at Shore Capital, said it was a “disappointing set of results” from RBS.

He added that Ms Rose will likely look to tackle the woes at NatWest markets as one of her priorities, with recent speculation suggesting she may look to slash the business further.