Taxpayer takes a hit as RBS posts pre-tax losses of £14 million a day
THE taxpayer-funded Royal Bank of Scotland yesterday reported a pre-tax £1.26 billion loss for the July to September period this year.
The loss recorded by the bank – 82 per cent owned by the taxpayer – represents £14 million a day over the period, and was partly put down to another £400m set aside to compensate customers who were mis-sold payment protection insurance (PPI).
The PPI scandal has cost the bank £1.7bn to date, prompting RBS finance director Bruce van Saun to describe the total charge as a “best guesstimate”. He said the bank had been guilty of underestimating customer response rates. The £1.26bn loss compared unfavourably with a £2bn profit recorded in the same period last year.
Despite the hit taken by the bank as it attempts to make good customers who fell foul of the PPI scandal, RBS executives were encouraged by an increase in group operating profit.
“Underlying performance has already improved enough to be generally comparable to peers,” said chief executive Stephen Hester.
But the loss reported by RBS was of concern to Cathy Jamieson, Labour’s Treasury spokeswoman, who said: “These are alarming figures and further proof that we need the proper independent and public inquiry into the culture of banking that Ed Miliband and Ed Balls have demanded. The Libor [exchange rate] arrangements in place now date back to the 1980s and are a clear example of the failure of self-regulation. But the government has been dragging its feet on reform.”
She added: “This issue was raised earlier in the year by Labour, during consideration of the Financial Services Bill, when the Libor scandal was starting to emerge. But Treasury ministers refused to even consider reform, showing they were both complacent and out of touch.”
Scottish Conservative finance spokesman Gavin Brown said: “It’s important to not just look at the headline figures, but to observe the underlying factors and trends. The increase in group operating profit is to be welcomed.
“While setting aside more money for PPI claim is prudent, it does appear we were told previously that they had already put aside more than enough. I wonder if there is more to come on this issue.” SNP Treasury spokesman Stuart Hosie said: “PPI mis-selling is one of the scandals of the bad years of banking that is finally coming home to roost.
“It is right that consumers who were mis-sold are able to get their money back and we welcome the signs that this is being sorted, and the banks are putting their house in order.”
Despite Mr Hester’s optimism, Investec analyst Ian Gordon said he foresaw trouble ahead for RBS, including its possible involvement in the Libor-fixing scandal and the sale of interest- rate swaps to borrowers.
During the quarter, RBS completed the flotation of 35 percent of its Direct Line insurance unit. The European Commission has ordered RBS to dispose of its entire interest in Direct Line by the end of 2014 as a condition for taking bailout money. On the stock market, shares were initially higher amid further signs of underlying progress, with the increase in core profits.
But the extra charges – and with the group still being the subject of an investigation into the industry’s Libor scandal – unnerved investors and sent shares down 2 per cent or 6.2p to 281.1p.
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Wednesday 22 May 2013
Temperature: 3 C to 13 C
Wind Speed: 23 mph
Wind direction: West
Temperature: 5 C to 11 C
Wind Speed: 23 mph
Wind direction: North west