Soaring legal and restructuring costs led RBS to a £153m loss in the first half of the year, its interim results show.
The bank spent £1.5bn as part of plans to carve Williams and Glyn and restructure the corporate and institutional division in the six months to July, compared to just £514m over the same period last year. This includes writing off £606m relating to “intangible software”.
By 2019 the total cost of restructuring will be around £5bn, the bank estimates.
In addition, costs relating to litigation and conduct shot up to £1.3bn, from just £250m in 2014. This includes anticipated costs following investigations in the foreign exchange market of £334m, £506m relating to mortgage-backed securities litigation and £157m for packaged bank accounts.
To date redress and administrative costs resulting from missold payment protection insurance total £3.8bn.
The statement also reveals RBS will carry out a review of investment advice following discussions with the FCA. The review results from the FSA’s 2013 mystery shopping exercise of investment advice offered by banks and building societies to retail clients.
Total income fell to £8.7bn from £10bn last year. The bank’s overall £153m loss compares to a profit over the same period last year of £1.4bn.
RBS chairman Philip Hampton says: “The decisions to sell or run-off significant parts of the business while investing in our core customer franchises has meant we are better positioned to deal with the constraints of structural regulatory reform, notably ring-fencing.
“Of course there are still some obstacles to overcome especially the resolution of outstanding conduct issues, including the investigations into our sale of residential mortgage-backed securities in the US between 2005-07, and the investigation by UK authorities into the bank’s approach to distressed businesses.
He adds: “Judging the ultimate scale of conduct costs remains extremely challenging.”