RBS swings to Q3 loss amid £900m PPI charge

Katie Murray, RBS CFO

UPDATE 3 — Royal Bank of Scotland Group on Thursday reported an attributable loss of £315 million for the third quarter amid a PPI charge of £900 million and a “challenging quarter” for its NatWest Markets investment banking unit.

The £900 million charge is for compensation to customers who were mis-sold payment protection insurance (PPI) on loans and credit cards.

UK banks were hurt by a late surge in PPI queries ahead of an August claims deadline — taking the industry’s final compensation bill above £43 billion.

“It would be a very brave FD (financial director) who said the line was completely drawn under it (PPI),” RBS chief financial officer Katie Murray told reporters.

RBS shares fell about 2.5%.

“PPI charge and a challenging quarter for NatWest Markets has pushed us to a loss for the quarter,” said RBS.

New RBS CEO Alison Rose faces the immediate job of fixing its NatWest Markets investment banking arm, which posted a quarterly loss of £193 million as total income plummeted to £150 million from £569 miilion in the same period last year. 

Jefferies analyst Joe Dickerson called the performance of NatWest Markets “deplorable.”

RBS said NatWest Markets suffered in August and September when borrowing costs in the US overnight lending markets spiked.

Mortgage lending grew to £8.6 billion in the quarter, up from £6.7 billion three months earlier — and RBS blamed competition for squeezing its net interest margin by 5 basis points to 1.97%.

Chief financial officer Katie Murray added: “These results demonstrate our solid underlying performance in a tough operating environment.

“The core retail and commercial bank continues to perform well, and we are making good progress against our targets for the year.

“We have seen strong growth across the business and our sustained high levels of capital and liquidity mean we are well positioned to support our customers in these uncertain times.”