RBS back in the red even without PPI write-off

Royal Bank of Scotland insisted yesterday that it was not able to calculate its potential bill for having mis-sold payment protection insurance (PPI) after Lloyds was landed with a £3.2bn charge for its part in the scandal.

The RBS chief executive, StephenHester, said Lloyds's rivals were still grappling with the implications of its settlement with regulators, which was announced on Thursday.

"We haven't made a provision in these quarterly accounts," he said as he unveiled RBS's latest results. "We felt the range of potential liabilities was too wide to responsibly make one. [Lloyds] came as a surprise to us and it has put out some information that we need to digest."

Mr Hester said RBS thought that its share of the PPI market was about a third of that of Lloyds, suggesting that the Edinburgh-based lender could be liable to pay close to £1bn.

On Thursday, Lloyds withdrew from a joint legal challenge by Britain's major banks against a High Court ruling that they should compensate all customers who were mis-sold PPI. Mr Hester refused to say whether RBS would follow suit. He criticised the way PPI was sold but said the principle of the case – to fight retrospective rules – still stood.

Even without making a provision for PPI, RBS went back into the red this year. The bank, which is 83 per cent owned by taxpayers, made a loss of £548m in the first quarter, compared with a £12m profit in the last three months of 2010.

Its bottom line was hurt by a £469m fee from the Government's Asset Protection Scheme and a £480m accounting hit from the increased value of RBS's own debt.

Operating profit came in at £1.05bn, up from £55m in the last quarter of 2010 and £882m a year ago. Like Lloyds, RBS had to set aside more money – £1.3bn – for losses in Ireland but total bad debts fell 9 per cent to £1.9bn.