Taxpayer-owned RBS racked up a £153 million half-year loss on Thursday after another £1.3 billion hit for conduct issues dragged it back into the red.
The period saw the group pay more than £400m to US authorities for its role in the foreign exchange rigging scandal and further increase its PPI compensation provision.
RBS also took another £1.5bn in restructuring charges amid an ongoing overhaul at the lender, and chief executive Ross McEwan cautioned of more pain to come as the bank faces further fines over legacy issues.
The group has put cash aside for potential settlement costs in the US related to mortgage backed securities.
“I don’t like seeing losses and I’ll not rest until these charges are behind us,”Mr McEwan said.
The half-year loss marks a reversal from a year earlier, when the bank made attributable profits of £1.43bn.
However, Mr McEwan insisted performance in the core bank was continuing to improve, with underlying operating profits 2% higher year-on-year at £3.45bn when restructuring and conduct charges are stripped out.
RBS also warned over further job cuts over the next few years as it goes “further and faster” with its restructuring.
The group said its corporate banking business was likely to be impacted but did not provide further details.
Chancellor George Osborne recently indicated the Government’s desire to start recouping some of the cash it ploughed into the business during its £45bn bail-out in 2008.
Mr McEwan refused to be drawn on the timing of a sale of shares, saying only the plans to begin offloading the Government stake was “welcome”.
Shares were in positive territory in morning trading as investors looked at improvements in the second quarter of the year when the bank returned a profit of £293m, up 27% on last year.
Chairman Sir Philip Hampton said the bank was progressing towards its operational goal and he was confident shareholders would see “a clearer picture of the bank RBS will become” by the end of this year.
He said a shares sale by the UK Government would be a “significant moment” in the bank’s development.
“The RBS of today is of course very different from the bank of 2009,” Sir Philip said.
“It has a greater focus on the quality of earnings and the control of risks. 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 right.”
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said the good news was the bank had “swung to an unexpected profit for the quarter, albeit a loss for the half year”.
He said, however, that “a number of clouds remain” on the horizon for RBS as it continues to rebuild.