Half-year losses add to woes for Hester and RBS

By MARTIN FLANAGAN
Published on 03/08/2012 00:08

Royal Bank of Scotland will unveil a half-year loss of about £1.5 billion today that will be overshadowed by a £300 million hit from its recent IT meltdown and two mis-selling scandals.

The bank, 82 per cent owned by the government, will set aside a further £130m for wrongly selling Payment Protection Insurance, taking the cost so far to £1.3bn.

The bank is also expected to allocate £125m to compensate RBS and NatWest customers locked out of their accounts by the recent major IT failure, and a provision of about £50m for its part in mis-selling interest rate swap contracts to small businesses.

Chief executive Stephen Hester will also be quizzed on the Libor rate-setting scandal and rumours of nationalisation which were being played down by sources in the City.

An underlying operating profit of £2bn is expected, but the compensation deals will take their toll and RBS expects to pay a hefty fine for its part in the Libor scandal.

Hester is also expected to update the City on the proposed flotation of its insurance division, which includes Churchill, Direct Line and the breakdown recovery service Green Flag. A proposal to list on the London Stock Exchange has been set for next month, but volatile markets may influence the decision.

The bank has been ordered by the European Commission to sell or float the insurance arm by the end of 2014 in return for its £45bn taxpayer bailout.

MARTIN FLANAGAN