The attributable loss for H1 2015 was down from a profit of £1,425 million in H1 2014.
£459 million of additional litigation and conduct costs were taken in Q2 2015, relating to mortgage backed securities litigation in the United States. An additional £69 million provision was taken in relation to interest rate hedging products redress.
However the bank saw a Q2 profit of £293 million, up from a loss of £446 million in Q1 2015 and a profit of £230 million in Q2 2014.
The bank has attributed the profit in part to the updated mortgage platform which enabled it to meet increased demand for mortgage products through Q2 2015. Applications rose 43% year-on-year and gross new lending is up 43% to £5.4 billion relative to the previous quarter. Market share of new mortgages reached 9.7% for Q2 2015, well in excess of RBS’s current stock share of 8.3%.
Cost reductions of £859 million were also achieved relative to H1 2014, leaving operating expenses excluding restructuring, litigation and conducts costs down 14% at £5,485 million and putting RBS on track to deliver its targeted £800 million of cost savings in 2015, according to the bank's statement.
RBS is also continuing to work towards the separation of Williams & Glyn in the summer of 2016 and IPO by the end of 2016. In May 2015 the Competition & Markets Authority announced that it had been asked by the Chancellor to advise on the competition implications of the Williams & Glyn divestment.
Chairman Philip Hampton said:
"These results demonstrate the strength of our underlying customer businesses with operating profit - excluding restructuring and conduct charges - of £1.8 billion for the quarter, up 11% on Q1. We have reported an attributable profit for the quarter, albeit a loss for the half year, which reflects the restructuring and conduct costs we are continuing to work through.
"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."
