RBS boss Stephen Hester conceded the banking sector’s reputation had hit “new lows“ as the taxpayer-backed lender counted the mounting cost of its failures.
The 80% state-owned bank set aside £310m to deal with the fallout from an IT meltdown and two mis-selling scandals, while half-year losses doubled to £1.5bn.
Unveiling the group’s half-year results, Hester admitted the banking industry was in “a chastening period“ and warned there was “some way still to go“ in mopping up mistakes made before the financial crisis.
But investors looked beyond headline figures and took cheer from an underlying performance in line with analysts’ expectations, sending RBS shares 4% higher.
The bank said the computer glitch on June 19 that locked many RBS, NatWest and Ulster Bank customers out of their accounts would cost it £125m.
But the lender warned the full cost of the failure, being investigated by an external counsel, could rise and a further update would be given in the third quarter.
RBS unveiled a £135m hit to cover the cost of payment protection insurance (PPI) mis-selling, bringing its total bill to £1.3bn, while it took a £50m charge to compensate small businesses that were mis-sold complex interest rate swaps.
But Hester, who waived his 2012 bonus in the wake of the IT debacle, said RBS had “undergone huge change for the better“ and added the “fruits of change are visible in many areas“.
He said: “We have continued to make the bank safer and stronger as we clean up problems of the past. And despite the tougher economy, these results show our ongoing businesses to be more resilient than before with further improvements under way.”
Asked to comment on reports that some within government would like to see the bank fully nationalised, Hester said “that is not a discussion we are part of“.
Looking within the results, the group revealed a 14% slide in total income to £13.6bn while its core banking operations saw a 19% drop in operating profits to £3.2bn.
Staff costs were 4% lower in the period, RBS said, with employee numbers down by 5,700, driven by cuts in its markets and international banking arm.
The bank revealed a near-40% slide in its bad debt charges to £2.6bn while total exposure to the troubled eurozone fell 8% to £218bn.
The group said its plans to float insurance arm Direct Line on the stock exchange in the second half of this year remain on track. It said it had dismissed a number of employees for misconduct as a result of investigations into the fixing of Libor – the interbank lending rate at the heart of the most recent scandal to rock the banking industry.
The bank said it continued to co-operate with investigations but, like Lloyds Banking Group and HSBC before it, said it was not possible to measure the impact on the bank, including the timing and amount of fines or settlements.