RBS slumps to loss after setting aside extra £900m for PPI compensation

Taxpayer-backed bank falls back into the red, with Brexit costs adding to PPI problems

Ben Chapman
Thursday 24 October 2019 10:00
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The results mark a blip on RBS' long and painful road to recovery
The results mark a blip on RBS' long and painful road to recovery

Royal Bank of Scotland has fallen back into the red after setting aside a further £900m to deal with a surge in PPI claims before the August deadline.

The majority taxpayer-owned bank posted an £8m loss in the three months to September compared with a £961m profit in the same quarter last year.

RBS also blamed its worse-than-expected performance on a “particularly challenging” quarter for its investment banking division.

Brexit is taking its toll, RBS said, as it revealed it had set aside another £55m to cover the cost of political and economic uncertainty.

The results mark a blip on RBS’s long and painful road to recovery. Last year, the lender delivered its first full-year profits since from a £45bn taxpayer bailout in 2008.

However, John Moore, senior investment manager at Brewin Dolphin, said the bank’s present pain is probably temporary.

“The last set of results for RBS were a watershed moment for the bank, confirming it is on the road to redemption.

“Whilst this remains the case, today’s statement highlights the legacy issues that the bank and many of its peers still face – in particular, PPI claims have pushed RBS back to a loss.

“This will likely be temporary.”

The PPI bill was at the top end of the £600m to £900m range given by RBS last month when it cautioned over higher-than-expected claims ahead of the deadline.

Operating profits dipped slightly to £2.7bn for the first nine months of the year, from £2.8bn reported a year ago. RBS said it remains on track to hit its full-year forecasts.

Chief financial officer Katie Murray said: “These results demonstrate our solid underlying performance in a tough operating environment.

“We have seen strong growth across the business, and our sustained high levels of capital and liquidity mean we are well-positioned to support our customers in these uncertain times.“

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