The 84% owned state bank announced that it suffered losses after tax of £1.4 billion in the year to June 30. Its balance sheet was hit by £850 million which it has set aside to settle PPI claims.
RBS has also suffered from its exposure to the desperate fiscal situation in Greece.
The bank lent £733 million to the Greek Government in the form of bonds and could possibly receive none of its investment back.
In its interim results, RBS said that if proposed restructuring of the Greek Government debt announced in July is realised, it could receive £275 million back in the second half of this year.
It also confirmed a £1.25 billion provision for losses at its Ulster Bank.
And despite reporting an improvement in its core operating profit from £1.1 billion to £1.7 billion, the bank's share price plummeted by 13% when the FTSE 100 opened this morning.
Stock markets across the world have been spooked by problems in the eurozone and the United States today, with the FTSE 100 falling below the 5,300 mark this morning.
All eyes will be on an announcement on US job figures later today, with fears that poorer than expected results could see stocks plummet yet further.
RBS is the latest bank to suffer from the fall out from the PPI saga.
The results of Lloyds Banking Group, Northern Rock, Barclays and HSBC earlier this week all showed provisions for PPI.
The banks lost their appeal to overturn the ruling that they must compensate customers that have been mis-sold PPI in the High Court earlier this year.
The Financial Ombudsman was inundated with claims in the first half of the year, with the number of PPI complaints hitting 8,000 a day.
