Royal Bank of Scotland (RBS) has admitted that it continues to be party to legal proceedings and regulatory and governmental investigations.
These include with respect to US mortgage-backed securities, foreign exchange trading and its treatment of UK SME customers.
The bank also continues to incur conduct related costs, including in relation to payment protection insurance and interest rate hedging products.
It has set aside £1.3bn to cover possible fines and other redress.
This admission came as it posted a £153m loss for the first six months of the year. This compares with a profit of £1.43bn 12 months ago.
Philip Hampton, chairman RBS, insisted that the organisation is today very different from the bank of 2009: “It has a greater focus on the quality of earnings and the control of risks,” he said.
“There have naturally been ups and downs along the way, which have required the strategy to change, but the focus on making this a stronger, simpler and fairer organisation has been the right one,” he added. “The decisions to sell or run-off significant parts of the business while investing in our core customer franchises has meant we are better positioned to deal with the constraints of structural regulatory reform, notably ring-fencing.
“Of course there are still some obstacles to overcome especially the resolution of outstanding conduct issues, including the investigations into our sale of residential mortgage-backed securities in the US between 2005-07, and the investigation by UK authorities into the bank’s approach to distressed businesses.
“Past experience at RBS and many other banks has demonstrated the readiness of regulators to impose substantial fines and costly redress schemes. These conduct and litigation costs have greatly exceeded the expectations of banks and their investors. Judging the ultimate scale of conduct costs remains extremely challenging.
“Looking forward, however, making customer service, trust and advocacy the focus of our strategy is starting to deliver results and by the end of this year I am confident that shareholders will see a clearer picture of the bank that RBS will become.
“This is an appropriate backdrop to the sale of shares by the UK government, which will be a significant moment for this bank.”