Part-nationalised British bank Royal Bank of Scotland (RBS) has reported third-quarter losses of £1.53 billion today despite some signs of improvement.
The operating loss was below Q2 losses of £3.53 billion. Bad debts remained high at £3.28 billion but around 30% below the April-June period, the bank said.
Ulster Bank still 'core part' of RBS
Chief executive Stephen Hester said he was 'upbeat, though realistic' over the 'tough job' ahead in restoring the bank's fortunes.
On Tuesday RBS agreed a deal which will see up to £33.5 billion in UK taxpayer funds pumped into the ailing bank, taking the public stake to 84%.The bank said bad debts were 'plateauing'.
The narrowing losses came largely from the non-core parts of the business already earmarked for sale. Operating losses shrank from £4.98 billion to £2.72 billion, although it will take time to work through the bank's remaining credit market exposures.
RBS added that retail banking profits in the UK, Ireland and the US remained 'subdued' with deposit margins under pressure due to record low interest rates.
The bank's cost-cutting programme has also delivered further efficiencies but RBS warned that this would mean more job losses on the way. The company announced another 3,700 job losses this week.
RBS burns through half of buffer
RBS is placing £282 billion in toxic debts into a taxpayer-backed insurance scheme but is being forced to sell off its Churchill and Direct Line insurance business, more than 300 branches and parts of its investment banking business in return for state support. The businesses on the block generated around £1.1 billion in operating profits for RBS last year.
The results also show that RBS has already eaten through nearly half the £60 billion 'excess' on toxic debts insured by the UK taxpayer. RBS agreed this week to put £282 billion in bad loans into the Asset Protection Scheme (APS), under which it shoulders the first £60 billion in losses on the debts.
But third-quarter results released today showed RBS used £26.6 billion of the buffer by the end of June. A further £3.2 billion in loan losses announced for the third quarter - mostly on APS assets - is likely to take RBS's 'first loss' close to £30 billion.
The taxpayer is liable for 90% of any hit above the £60 billion under the APS although the recent tentative signs of improvement make losses less likely. RBS is taking a bigger first loss than originally planned under the APS in return for a smaller fee.
