RBS Third Quarter Profits Fall 99.8% To £2m

State-backed Royal Bank of Scotland (LSE: RBS.L - news) saw profits almost wiped out in the third quarter to just £2m as it counted the cost of restructuring and past misconduct.

The operating profit before tax figure was 99.8% lower than the £1.1bn reported in the same period last year, mainly due to a big accounting gain recorded in 2014 on the better-than-expected performance of its toxic “bad bank” assets.

But the latest three months to the end of September saw RBS hit by litigation and conduct costs of £129m – mainly related to US mortgages – and £847m for restructuring.

The lender, which remains 73% owned by the taxpayer after being rescued during the financial crisis, conceded that provisions for past misconduct issues could continue to climb and become "substantially greater" than currently believed. It (Other OTC: ITGL - news) has already set aside £4.5bn to cover regulatory and legal actions.

Restructuring costs are also expected to remain high, the bank said.

But RBS said it was on track to achieve targets including cost-cutting.

Chief executive Ross McEwan said: "These results show that we are making really good progress against the targets we have set ourselves and we are becoming a much stronger bank."

The group, which includes NatWest, would have reported a £134m loss but for an accounting adjustment related to the lower cost of buying back its own debt.

RBS also announced the sale of its final 20.9% stake in US bank Citizens (NYSE: CIA - news) , worth £1.1bn.

In July the Government began selling off its share in RBS by disposing of a £2.1bn chunk of the bank - though faced criticism for doing this at a £1bn loss to the taxpayer.

Richard Hunter, head of equities at Hargreaves Lansdown (LSE: HL.L - news) stockbrokers, said: "RBS continues to atone for past mistakes in a turnaround which is complicated, costly and protracted."