RBS suffers £1.5bn loss in first half of 2012


Three years into his five-year turnaround plan, Mr Hester indicated that the taxpayer-backed lender was still being hit by toxic assets, but had “achieved an important milestone” by repaying all the Government loans given to it during the credit crisis reports The Telegraph.

In its half-year report, RBS said it has set aside £135m for the mis-selling of Payment Protection Insurance – taking its total bill to £1.3bn – and £125m to cover costs related to the significant IT problems that rocked the bank in June. The computer glitch left millions of customers unable to access their accounts, and RBS has launched an investigation into the issue.

In addition, it earmarked £50m for compensation over the interest rate swaps scandal.
With the banks under fire for the recent rate-rigging that has rocked Barclays, Mr Hester said RBS – 82pc owned by the UK government – had dismissed staff for misconduct in relation to the Libor scandal. Warning of a “chastening” period for the sector, he said RBS is still dealing with “past actions” and “it is no comfort that many are shared across the industry”.

“All companies make mistakes and have individual cases of wrongdoing,” Mr Hester said. “Most things that had gone wrong in the industry as a whole had also been present within RBS… The nature of financial services tends to magnify the impact of these.

“The Libor situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact. This is the subject of ongoing regulatory investigation but our customers and shareholders should be in no doubt that we are taking it seriously. These issues together are hard to deal with but just as necessary a part of change from the past as the restructuring of our balance sheet.”

The high street banking arm “faced headwinds” abd operating profits fell 12pc to £2bn, with profits at the investment banking division dropping 21pc to £1bn.

RBS lost 5,700 staff during the first half, principally in invesment banking as Mr Hester attempts to restructure the lender to be more retail-focused. Indeed, customer deposits are up £7bn on the same period last year.

The bank continues to shed businesses that are not part of its core plans. The IPO of Direct Line later this year is “on track”, while RBS continues to work with Santander on the sale of the RBS England & Wales and NatWest Scotland branch-based businesses.

Overall net lending in the first six months was £49.2bn, with £7.7bn of mortgage lending. Retail lending grew 2 per cent, while loans to businesses rose 4 per cent.

Looking to strengthen RBS for a year in which “economic and regulatory challenges are unlikely to abate”, the bank has strengthened its Core Tier 1 ratio to 11.1 per cent.

RBS shares rose 1.9 per cent to 208.3p in early trading.