Banking: RBS to take £2.5bn hit

The mass problem-fixing is the latest stage of chief executive Ross McEwan’s attempts to turn around the lender so the Government can shed more of the 73 per cent stake it still owns after bailing it out at the height of the financial crisis.

RBS said in a statement that it would also make a £4.2bn payment into its pension scheme due to changes in its accounting policy, while it will set aside an extra $2.2bn for mortgage-related litigation in the United States.

The extra provision for the US litigation would reduce fourth-quarter profits by £1.5bn, while a further provision for payment protection insurance mis-selling would cut off a further £500m and a goodwill impairment charge at its private bank would take off a further £498m, it said.

The group remained tight-lipped on the timetable for settlement of the US mortgage legal action. It is the last of the major banks to settle with US authorities over toxic mortgage-backed bonds sold in the pre-crisis years. More than a dozen banks have already settled their cases.

Mr McEwan, who joined the bank in 2013, said: “I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank. We will now continue to move further and faster in 2016 to clean-up the bank and improve our core businesses.”

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 and building a great bank for our customers and delivering long term value for our shareholders.”

The bank said the combined effect of this, plus other provisions and charges, would reduce its common equity Tier 1 capital ratio by 1.6 per cent.