LONDON (Reuters) – Royal Bank of Scotland <RBS.L> said it had swung to a third quarter loss on Thursday, after making a fresh 900 million pound ($1.16 billion) provision to settle mis-selling claims in Britain’s biggest consumer banking scandal.
The state-backed lender reported a pre-tax loss of 8 million pounds for the three months to end-September, compared to a 961 million pound pre-tax profit in the same period last year.
The charge, set aside to compensate customers who were mis-sold payment protection insurance on loans and credit cards, knocked the bank’s core capital ratio by 50 basis points to 15.7 percent.
A torrid quarter for RBS’s investment banking arm Nat West Markets – which posted a loss of 193 million pounds for the quarter – and intensifying competitive pressure in the mortgage market, also weighed on the bank.
The unit’s total income dropped by 419 million pounds to 150 million pounds compared with the third quarter last year, with a depressed bond market hitting income in its rates business.
RBS’s bank’s net interest margin – a measure of underlying profitability – which fell to 1.97%, down from 2.02% the previous quarter.
The provision for payment protection insurance (PPI) was at the higher end of a 600-900 million pound forecast issued by RBS in September.
British lenders were stung by a late surge in PPI queries ahead of a claims deadline of August 29, sending the industry’s final compensation bill soaring above 43 billion pounds.
The results come ahead of incoming CEO Alison Rose taking the helm at the bank on November 1.
Rose, an RBS veteran who will become the first woman to lead one of Britain’s big four banks, is expected to outline her new strategy in February.
Shareholders have called on the lender’s management to radically pare back its investment banking activities to concentrate on higher-returning businesses.
($1 = 0.7743 pounds)
(Reporting by Iain Withers, editing by Sinead Cruise)