RBS Warns Of 2015 Loss Amid £2.5bn 'Clean-Up' Charges

RBS Warns Of 2015 Loss Amid £2.5bn 'Clean-Up' Charges

Royal Bank of Scotland has confirmed it will post a loss for 2015 after taking a £2.5 billion hit including more mammoth charges for mis-selling scandals.

Bosses at the bank said the latest "clean-up" charges are set to see it remain in the red when it posts full-year results next month - its eighth year running of annual losses.

RBS is setting aside another£500 million for payment protection insurance (PPI) mis-selling claims, as well as £1.5 billion to cover US legal action on toxic mortgage-backed bonds sold before the financial crisis.

It also also revealed a £498 million write-down on the value of its troubled private bank, Coutts, while it said it was pumping another £4.2 billion into its pension scheme.

While the pension payment will largely come from reserves, the remaining £2.5 billion in provisions and write-downs will directly hit its bottom line.

Shares in RBS sank 3% to a new three-year low.

RBS chief executive Ross McEwan said: "I am determined to put the issues of the past behind us."

He added: "We've always been open about the scale of past issues facing RBS and, although there is clearly much more to do, this announcement is a further step towards addressing legacy issues."

The additional provision for US mortgage legal action takes its total to £3.8 billion, but further hefty charges are expected as the bank nears a settlement with authorities in America.

RBS stressed the latest provision only covers civil claims and does not relate to ongoing investigations by the Department of Justice or US attorneys.

It is the last of the major banks to settle with US authorities, with more than a dozen lenders already having agreed settlements.

The bank's PPI provision sees its total bill for the scandal reach £4.3 billion and Mr McEwan said it was a "lesson to the entire banking industry of the importance of treating customers fairly".

Rival high street bank Santander also counted the cost of the mis-selling saga as the Spanish-owned lender posted a 4% drop in profits for 2015 to £1.3 billion after it took another £450 million charge for PPI.

RBS, which is still 73% owned by the Government, will reveal the scale of its losses when it posts full-year results on February 26.

It posted £3.5 billion in annual losses last year, taking the running total to nearly £50 billion since it was bailed out in 2008.

Russ Mould, investment director at AJ Bell, said: "It's another bitter pill, but putting legacy issues behind it is essential if Chancellor George Osborne is going to off-load the Government's stake during this parliament."

But banking analyst Gary Greenwood, at Shore Capital, said that, while "disappointing", the latest financial charges are not unexpected.

RBS said the extra PPI payment should draw a line under its financial toll for the scandal, covering mis-selling compensation up to the proposed two-year deadline being set by regulators for claims.

Its pension payment comes after the group revised its accounting policy for the defined benefit scheme.

The fund was closed to new members 10 years ago, but still has around 220,000 members.

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