RBS turns profit for third month running but US penalties still pending

Ross McEwan
Ross McEwan

After a £392m profit for the July-to-September period saw profits for the year hit £1.3bn, Royal Bank of Scotland has said it is “on track”, despite still bracing for a monster fine from US authorities.

It is only the second time since 2008, the year that the still 73 percent state-owned was rescued by a £45bn taxpayer bailout, has turned a profit for three consecutive quarters.

The lender said its results for the third-quarter this year compares with a loss of £469m for the same period last year and that it has made no further provision for mis-selling of payment protection insurance, while conduct and litigation costs were £125m for the quarter.

However, the ongoing scandal surrounding the mis-selling of old mortgage bonds in the years leading up to the 2008 financial crisis could yet cost the Edinburgh-based bank such a huge amount that it would be pushed back into the red for the year.

That is despite RBS noting that it had also taken out £708m in costs as part of a simplification programme that had reduced the size of the business.

“Our strategy to deliver a simpler, safer, customer-focused bank is working,” said RBS chief executive Ross McEwan.

“We have grown income, reduced costs, made better use of our capital and continued to make progress on our legacy conduct issues.

“Our core bank continues to generate strong profits and we remain on track to hit our financial targets.”

Meanwhile, RBS has also disclosed that it has paid out £33.4 million to settle another US criminal investigation that accused traders of lying to customers over bond prices.

The US Department of Justice said RBS would pay a £26.7m penalty, and compensation of around £6.8m to more than 30 victims.

The inquiry targeted a fraud from 2008 to 2013, which aimed to boost profits by defrauding customers over trade in residential mortgagebacked securities and collateralised loan obligations. think-tank has warned.

The Institute for Fiscal Studies (IFS) found 36 per cent self-assessment payers had some under-reporting of their tax returns, rising to 60 per cent among the self-employed.

While most underpayments were less than £1,000, a small minority – less than 4 per cent – owed more than £10,000 and accounted for nearly half of the missing revenue from self-assessment.

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