The boss of Royal Bank of Scotland warned over more charges for past wrongdoing and a “further and faster” overhaul after another £1.3 billion hit for banking scandals sent it into the red.
Taxpayer-backed RBS posted half-year losses of £153 million against profits of £1.4bn a year ago after setting aside the hefty charge and as it took after £1.5bn in restructuring costs.
Chief executive Ross McEwan cautioned of more pain to come as the bank faces further fines for “conduct issues of the past”, with RBS braced for settlement costs in the US related to mortgage backed securities, which have battered many of its rivals in America over the past couple of years.
RBS put aside £459m of extra cash in the second quarter to cover fines and litigation, including mis-selling of complex interest rate products to small businesses and US mortgage securities.
The group and its US business Citizens are facing allegations that the group misled investors over the quality of mortgage backed securities sold in America in the run up to the financial crisis.
Its overall £1.3bn bill for the half-year also includes fines for its role in the foreign exchange rigging scandal after it was hit with another US penalty of more than £400m in May, as well as further compensation for payment protection insurance (PPI) mis-selling.
Mr McEwan said: “I don’t like seeing losses and I’ll not rest until these charges are behind us.”
RBS, which is still 78 per cent owned by the Government, also warned over further job cuts over the next few years as it seeks to ramp up restructuring efforts.
The group said job losses would impact its corporate banking business in particular, but did not provide further details on numbers or timing.
Mr McEwan said: “This year will continue to be a noisy year as we go further and faster with restructuring and with all the conduct issues of the past.”
He also admitted the IT blunder last month that delayed payments and direct debits for thousands of customers was “unacceptable”.
The group is still working through compensation payments to those affected and talking to regulators, although Mr McEwan said the financial impact to the group was “limited”.
He insisted performance in the core bank was continuing to improve, with underlying operating profits for the half-year two per cent higher year-on-year at £3.45bn, with restructuring and conduct charges stripped out.
The bank’s second quarter figures also suggested an improving picture, with attributable profits for the three months of £293m - up 27 per cent year-on-year.
RBS said its mortgage business had performed well during the second quarter, with gross new lending up 43 per cent to £5.4bn.
Mr McEwan refused to be drawn on the exact timing of any planned sale of shares in the bank by the Treasury, saying only that the plans to begin offloading the government stake was “welcome”.
Chancellor George Osborne has already said he wants to start selling shares in RBS by the end of the year and it is thought this plan could begin as soon as September.
Mr McEwan said the upcoming US mortgage related charges are not likely to hamper any shares sale by the Government, saying the Treasury has acknowledged the bank is in “much better shape”.