The Royal Bank of Scotland Group (RBS) (LSE:RBS) (NYSE:RBS) revealed today that it has set aside GBP125m to cover costs related to the recent problem in its IT systems.
The computer problem in June, which was triggered by a failed software upgrade, prevented millions of customers of RBS, NatWest and Ulster Bank from paying bills or moving money for several days.
Following this and other computer mistakes at British banks and and the mis-selling of financial products, as well as the scandal over the manipulation of Libor, RBS chief executive Stephen Hester has admitted that the reputation of the banking industry has fallen to a new low. This is “a grim period for the reputation of our industry and for RBS within it,” he said.
RBS also announced today that it has made a further provision of GBP135m for payment protection insurance (PPI) compensation claims, taking its total charge for the industry-wide scandal to GBP1.3bn. In addition, based on agreement reached between the Financial Services Authority and RBS, Barclays, HSBC and Lloyds, RBS has set aside GBP50m for claims from small business customers who were mis-sold interest rate swaps.
In its half-year financial results, RBS reported a loss of GBP1.5bn for the six months to 30 June 2012, compared with the loss of GBP794m in the same period last year. Excluding the various provisions and a GBP3bn accounting charge on its own debt, RBS made an operating profit of GBP3.2bn.
RBS is 82% owned by the UK government, as a result of taxpayer bail-outs at the height of the global financial crisis. Hester confirmed today that the bank has already expensed GBP2.5bn for the asset protection scheme, the minimum fee payable, and intends to exit the scheme in the second half of 2012.
Meanwhile RBS is also preparing for the planned spin-off of its Direct Line insurance business, a requirement set down by the European Union. The share offering is planned for later this year.