RBS losses widen to £968m after one-off bailout repayment to UK Government

Royal Bank of Scotland (RBS) said its first quarter loss almost doubled, after the lender repaid £1.19bn (€1.53bn, $1.74bn) to the UK Government for the support it received during the financial crisis.

In the three months to 31 March, the FTSE 100 lender posted a £968m loss, significantly higher than the £459m loss it recorded a year ago and higher than the £957m analysts expected.

The bank, which was rescued in a £46bn bailout during the financial crisis and has not posted a profit since 2007, said the losses were exacerbated by a £238m restructuring bill, which includes the increasing costs of spinning off its Williams & Glyn business. The bank admitted it might not be able complete the sale by the end of next year and would therefore fail to meet a regulatory deadline.

As a result, the bank cast further doubts over whether it will resume its dividend payment policy in the short term future.

"We continue to deal with a range of uncertainties in the external environment, not least those caused by the forthcoming referendum on the UK's continuing membership of the European Union," it said.

There was, however, some positive news for Britain's biggest taxpayer-owned bank, as operating expenses declined from £3.61bn in the first quarter of last year to £2.42bn. The decline was almost exclusively due to a sharp drop in litigation costs, which fell from £856m to £31m in the period, the Edinburgh-based bank said, adding it was on track to achieve £800m in cost savings this year.

"We retain our expectation that cost reduction will exceed any income erosion across our combined core businesses. We will incur a charge of approximately £50m [in respect of] the Financial Services Compensation Scheme (FSCS) levy in our second quarter results."

Meanwhile, operating profit before tax surged from £37m to £421m, although adjusted operating profit slumped to £440m from £1.36bn largely because the group's Capital Resolution business swung to a loss and because of the IFRS volatility charge.

Adjusted operating profit in RBS' private banking division and UK personal and business banking fell 40% year-on-year and 9% year-on-year respectively, while the commercial banking division saw operating profit climb 7%.

RBS added total income fell 3% "reflecting margin pressure and reduced fee income", but was 2% higher than in the last quarter of 2015.