RBS increases PPI allocation by £400mn
Move raises PPI costs to £1.7 billion
By CFOWorld.co.uk staff | CFO UK | Published 10:48, 02 November 12
Royal Bank of Scotland (RBS) has increased its financial allocation to cover the cost of payment protection insurance (PPI) mis-selling by £400 million to £1.7 billion.
On Friday, RBS reported a pre-tax loss of £1.26 billion for the three months to September-end versus a £2 billion profit in the corresponding quarter last year. It also said costs for the computer glitch, which resulted in a denial of access for many RBS, NatWest and Ulster Bank account holders, currently totals £175 million. It has allocated another £50 million in anticipation of further costs.
The bank also cautioned that it could be hit with punitive measures over any involvement in Libor rate rigging scandal as it is presently being investigated by UK, US and some Asian governments. RBS hopes to enter into negotiations to settle some Libor investigations in the "near term" but that the size of any fine was uncertain.
Away from PPI and Libor related problems, RBS’ operating profits for the quarter came in at £1 billion, up from a £650 million profit in the second quarter. Bad debt losses dipped £159 million from the second quarter to £1.2 billion.
The bank revealed that employee costs were 5 percent lower than in the second quarter at £1.9 billion, with numbers down by 9,900, or 7 percent on an annualised basis.
Despite the overall pre-tax loss, chief executive Stephen Hester said that the bank was making progress and that restructuring was on track for completion within the next 18 months.
"The extraordinary challenges which RBS faced following the financial crisis are being worked through successfully. The five year restructuring plan is now in its later stages with important work still to do, including an emphasis on dealing with reputational issues now that the bank's safety and soundness has advanced so well," he explained.
The bank is 80 percent UK taxpayer owned. Earlier on Thursday, Lloyds Banking Group revealed an additional £1 billion allocation for PPI claims.
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