RBS faces ninth year of losses as £3.1bn is added to mis-selling bill

Taxpayer-backed Royal Bank of Scotland today took a £3.1 billion hit for mis-selling toxic mortgage-backed bonds in the lead-up to the financial crisis, which will condemn it to a ninth successive year of losses.

The widely expected blow takes RBS’s total provisions on the issue so far to £6.7 billion but the bank failed to draw a line under the problem.

Negotiations with the US Department of Justice continue and “further substantial additional provisions and costs may be recognised”, it warned.

The looming threat of heavy financial penalties prompted Chancellor Philip Hammond to shelve plans to offload RBS, which is 73% state-owned, at a loss last year.

RBS is the latest European bank to be close to a settlement with US authorities.

Credit Suisse this month agreed to pay $5.3 billion (£4.2 billion) and Deutsche Bank agreed to pay $7.2 billion to settle their mis-selling cases.

Chief executive Ross McEwan said clearing up the bank’s legacy legal issues “remains a key part of our strategy”.

RBS agreed an £800 million settlement last month with some shareholder groups suing the bank over its £12 billion rights issue in 2008, claiming it had misrepresented the true state of its finances on the eve of the financial crisis.

Shareholders originally claimed more than £4 billion.

The shares rose by 4%, 9.6p to 237.1p, as markets welcomed the guidance on the size of the provision.

But analysts warned of more bad news in the pipeline.

Shore Capital’s Gary Greenwood said: “It is no surprise to see the group set aside another substantial provision in this respect as management had already guided that this would be a likely outcome.

“However, it does not draw a line under the matter and, until there is a firm conclusion of the DoJ’s investigation, significant uncertainty remains as to the ultimate cost.”