RBS posts first-quarter losses

Part-nationalised Royal Bank of Scotland today posted steeper losses in the first three months of the year but assured investors it was on the road to recovery.

RBS, which is 83% owned by the taxpayer, revealed a pre-tax loss of £116 million in the first quarter to March, up from £8 million in the previous quarter and £5 million in the same period last year.

But chief executive Stephen Hester said the bank expects "continued progress" and "enduring gain" as it also revealed better-than-expected operating profits of £1.1 billion, compared to £55 million in the last quarter.

The bank's Churchill and Direct Line insurance arm, which it is committed to selling, also returned to a profit, turning £67 million in the quarter, compared to a loss of £9 million in the previous three months.

Elsewhere, the bank warned the fallout from a court ruling on payment protection insurance claims could have a "material" impact on the lender but refused to say exactly how much it would cost.

RBS revealed bad debts of £1.95 billion, including a £1.3 billion hit from Ulster Bank, which is exposed to Ireland's struggling economy.

The group also took a £469 million charge from a market valuation of credit insurance provided to RBS by taxpayers under the Asset Protection Scheme (APS).

But RBS saw income rise 8% quarter-on-quarter to £8 billion, driven by a strong performance at its investment banking arm Global Banking and Markets (GBM).

Mr Hester said the bank's recovery allowed it to absorb higher Irish bad debts and regulatory demands.

He said: "As we work through these items, the group's regained strength and core profitability should be the enduring gain, becoming increasingly available to drive shareholder returns."

RBS said it would wait for the British Bankers' Association (BBA) to make a decision on appealing against the court ruling on the mis-selling of PPI before it reveals the cost to its business.

The move contrasts with Lloyds Banking Group, which admitted yesterday it was facing a potential bill of more than £3 billion to cover the cost of compensating people mis-sold the policies.

Elsewhere, RBS reiterated its belief that proposals outlined in the Independent Commission on Banking (ICB) interim report to ringfence retail and investment operations would increase bank costs.

The bank warned this would have an impact on customers and shareholders and said it would continue to engage constructively with the ICB.

The Financial Services Authority (FSA) is battling to publish its report into the collapse of RBS at the height of the financial crisis.

The FSA has been overcome by legal complexities in getting the report cleared by RBS lawyers and a new timetable has not been set for its publication.