Royal Bank of Scotland has written off another £780m for past misconduct and warned that further charges will hit its profits as the banking scandal rumbles on.
RBS set aside £400m to settle claims of foreign exchange (forex) rate rigging – the latest institution to do so amid global investigations into the scandal.
The bank, which is 80 per cent owned by the taxpayer following a £45bn bailout during the financial crisis, also added £100m to its compensation bill for the mis-selling of payment protection insurance (PPI), taking the total so far to £3.3bn.
Further sums included £100m in regulatory provisions which include a coming settlement with the Financial Conduct Authority (FCA) over a 2012 IT failure. There were also litigation costs as RBS faces a series of lawsuits in the US.
Despite reporting a third consecutive profits haul, RBS said further work is needed before it can pay back the taxpayer or restart dividends.
Chief executive Ross McEwan, who steered the bank back into profit this year after it made a loss of £8.2bn in 2013, said: “We are actively managing down a slate of significant legacy issues.
“This includes significant conduct and litigation issues that will continue to hit our profits in the quarters ahead.”
Mr McEwan said RBS won’t pay a dividend until it has more clarity over future misconduct charges.
“I don’t think we should be thinking about dividends until we’ve got a really good capital build and seen some of the bumps in the road out of the way,” he said.
RBS said it made a third-quarter pre-tax profit of £1.3bn, compared with a loss of £634m the year before. This was ahead of an average analyst forecast of £1.1bn.
The economic recovery in Britain and Ireland has enabled RBS to recover debts that were previously written off.
The bank had a net release of previously written-off loans of £801m during the quarter, ahead of an average forecast of £590m.
RBS has decided to keep Ulster Bank, having carried out a review of the business which could have resulted in it being sold off.
Mr McEwan said the unit could deliver attractive shareholder returns in future.
“We know we still have a long list of conduct and litigation issues to deal with and much, much more to do to restore our customers’ trust in us,” he said.
Gross new mortgage lending totalled £5.3bn while gross lending to small and medium enterprises was £2.6bn, up 24 per cent from the same period last year.
RBS said its corporate and institutional banking division “had a weak quarter” as it was hit by the conduct charges as well as lower income, but personal and business banking increased operating profit by three per cent to £499m.
“We are delighted with the third quarter of profits, demonstrating that our strategy is starting to deliver good results,” said Mr McEwan.
He added that the UK economy is in “pretty good shape” though growth is expected to drop next year and the housing market is easing.
Mr McEwan made clear that the timing of any sale of the taxpayers’ stake in the bank is a matter for the Government.
He declined to give any figures about branch closure plans – days after Lloyds said it was shutting 200.
But he said: “We have made no bones about the inevitability of branch closures as more and more customers use digital to do day-to-day banking.”
The bank has over 5,500 staff and pensioners in Yorkshire and over 1.1 million personal customers and 72,000 business customers.