PPI bill costs RBS £1.7 billion
Royal Bank of Scotland racked up another £450 million in charges today as it counted the mounting cost of its recent IT meltdown and the PPI mis-selling scandal.
The 80 per cent British state-owned bank took an extra £400 million hit in the third quarter to cover the cost of payment protection insurance mis-selling, bringing its total bill to £1.7 billion.
The cost of dealing with the fallout of the computer glitch that locked many RBS, NatWest and Ulster Bank customers out of their accounts also rose by £50 million to £175 million.
The mounting provisions came as the bank, which has 30 million customers worldwide, unveiled a pre-tax loss of £1.3 billion, compared to a £2 billion profit in the same period last year.
The total mis-sold PPI bill for Britain’s big four lenders has risen to more than £10 billion, with HSBC forecast to post a more modest provision next week.
The additional £50 million provision for the IT fiasco in June will cover customer redress, RBS said, including interest lost and other compensation costs. The incident is being investigated by an independent external counsel with the assistance of third party advisers.
Chief executive Stephen Hester said its five-year restructuring plan is now in its later stages and is being worked through successfully.
He added: “We have already made much progress, though clearly not enough, and our reputation will take time to recover from past events which are still being accounted for.”
The additional provisions overshadowed underlying progress at the bank.
The group’s core businesses - what will become the “new” bank - saw operating profits rise 67 per cent year-on-year in the third quarter to £1.6 billion.
The non-core assets fell by a further £7 billion to £65 billion in the quarter and have been reduced by 75 per cent to date, while its bad-debt losses fell by £159 million from the previous quarter to £1.2 billion.
Staff costs were 5 per cent lower than in the second quarter at £1.9 billion, with headcount down by 9,900 or 7 per cent from a year earlier.
The group cleared two major milestones in the period, floating its insurance arm Direct Line Group in October, raising £911 million from the sale of a 34.7 per cent stake, and it exited from the government’s Asset Protection Scheme.