Pre-tax profit before one-time items and restructuring costs came in at £842 million for the quarter, compared to £2.05 billion a year earlier.
The bank announced the sale of its final 20.9 per cent stake in US bank Citizens worth £1.1 billion.
The bank, which is 73 per cent owned by the taxpayer, revealed litigation costs of £129 million for the quarter, principally relating to mortgage-backed securities.
Income was down £596 million compare to Q3 last year, which the bank said was driven by a £394 million decline in Corporate & Institutional Banking.
“Income pressures were also seen in UK personal & business banking and commercial banking where good loan volume growth was offset by continued competitive pressure on asset margins.”
Elsewhere, there was continued growth in its mortgage lending, up 3.6 per cent on the second quarter to £3.8 billion. It added that gross new mortgage lending was 42 per cent up on a year ago, “representing a 12 per cent market share of new lending against our stock market share of 8.5 per cent”.
In July the Government began the process of privatising RBS by selling a £2.1 billion stake in the bank - at a loss of more than £1 billion to the taxpayer.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, described today’s results as mixed, adding: “RBS continues to atone for past mistakes in a turnaround which is complicated, costly and protracted.
“There are some signs of cheer - the Citizens stake is now out of the way entirely, operating expenses and impairments are both moving in the right direction, whilst the capital cushion is healthy. In addition, even though it is no more than the thin end of the wedge, the Government has begun to reduce its stake, albeit leaving a hefty 73 per cent interest.
“Less positively, restructuring costs remain very high, there has been pressure on the investment bank and personal divisions due to reshaping costs and margin pressure respectively, whilst a dividend payment remains a distant dream with the earliest date being the first quarter of 2017.
“In an interest rate environment such as this, the lack of any yield is another factor which has resulted in investors shunning the shares.”