Royal Bank of Scotland has warned the it may face material losses over payment protection insurance compensation but says it cannot estimate the cost because of uncertainties around the final outcome of the British Bankers’ Association judicial review.
Last month the BBA lost a judicial review into the FSA’s complaints handling measures for PPI and has until May 10 to launch an appeal.
The bank’s Q1 interim management statement says: “The uncertainties mean that, at this time, the group is unable reliably to estimate any potential financial liability, although it could prove to be material.”
It comes after yesterday Lloyds announced that it had made a £3.2bn provision to cover the cost of any compensation adding that it was withdrawing from the BBA’s action.
Today city analysts have estimated compensation could cost the industry as much as £10bn.
RBS has also revealed a pre-tax loss of £116m in Q1 of 2011, up from the £8m lost in the final quarter of last year.
At an operating level, RBS posted a profit of £1.05bn, up from £55m in Q4 of 2010, but its net loss of £528 in Q1 included a £469m charge under the Government’s Asset Protection Scheme and a £480m charge against its debt.
The bank saw a rise in its capital buffer from 10.7 per cent in 2010 to 11.2 per cent in this quarter but said it intends to reduce that around 8 per cent by 2013, one per cent higher than that which will be required under Basel III.