Royal Bank of Scotland has swung to a £469 million loss in the third quarter and confirmed it will miss its deadline to sell off its Williams & Glyn branch network.
The figure compares with a profit of £940m in the same period last year, when the bank’s balance sheet was boosted by the sale of US lender Citizens.
Edinburgh-based RBS, which is still 73 per cent owned by the taxpayer, said that despite “positive” talks with potential buyers for Williams & Glyn, it will miss its deadline to dispose of the business by the end of next year.
The group must offload the 300-strong branch network to comply with European state aid rules linked to its £45 billion bailout at the height of the financial crisis.
It said today: “RBS has had positive discussions with a number of interested parties concerning a transaction related to substantially all of the [Williams & Glyn] business. These discussions are ongoing and may or may not lead to a viable transaction.
“However, none of the proposals under discussion can deliver full separation and divestment by 31 December 2017. 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.”
Those interested in a potential deal for Williams & Glyn include CYBG, the owner of Glasgow-based Clydesdale Bank, which said earlier this week that it had made a “preliminary non-binding proposal” to acquire the network.
RBS also said today that its third-quarter results were hit by £425m of conduct and litigation charges, largely linked to the sale of mortgage-backed securities in the US, along with £469m in restructuring costs.
Stripping out restructuring and litigation costs, the group’s operating profits came in at £1.3bn for the three months to the end of September, up from £826m for the same period a year ago.
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 £1.3bn adjusted operating profit, our best quarter since 2014. The core business has now delivered on average over £1bn in adjusted operating profit for the last seven quarters.”
McEwan said that RBS now expects full-year restructuring charges to come in at about £1.5bn, compared with previous guidance of “over £1bn”, and warned of further litigation costs linked to the sale of mortgage-backed securities in the US.
“Substantial additional charges and costs may be recognised in the coming quarters which would have an impact on the group’s level of capital,” RBS said.
“In view of the above, the timing of returning excess capital to shareholders through dividends or buybacks remains uncertain.”
On Brexit, McEwan added: “The economy is holding up, but there is uncertainty. We saw a fall in mortgage applications but that’s now back to normal. Time will tell.”
Today’s results come after campaigners said RBS needs to pay “at least £2bn” to compensate 500 businesses that allegedly suffered at the hands of the bank’s former Global Restructuring Group (GRG) for SMEs that got into financial difficulties.
The RBS GRG Business Action Group said: “The longer RBS strings this out, the greater the likely compensation bill it will face.”
The bank is also grappling with legal claims surrounding its 2008 rights issue. Yesterday, the RBoS Shareholder Action Group said it would continue its £1.25bn compensation claim despite reports that the lender was looking to settle some outstanding cases.