RBS to pay out £125m over computer glitch

Royal Bank of Scotland (RBS) has put aside £125m to pay compensation to customers affected by the recent breakdown in its computer systems.

Account holders at RBS and its NatWest and Ulster Bank subsidiaries faced disruption for up to two weeks in June after a software upgrade at the bank.

RBS released the compensation figure as it reported a half-year loss of £1.5bn, compared with £794m a year earlier.

Much of the loss was caused by a £3bn accounting charge.

This was a result of the bank having to change the valuation of its debt.

The bank's revenues for the six months to 30 June fell 8% to £13.2bn.

Investors appeared to give the results a warm welcome, as RBS's shares ended Friday trading in London up 5.6%.

RBS chief executive Stephen Hester told BBC Radio 4's Today programme: "It is a pretty tough external environment, but I think we are making good progress."

RBS also said it had set aside a further £135m to cover compensation for customers who were mis-sold payment protection insurance, taking the total up to £1.3bn.

In addition, it will pay out up to £50m to cover claims from small businesses who were mis-sold specialist insurance, known as interest rate swaps.

The bank is 82% owned by the government, which needed to bail it out in 2008 and 2009 at the height of the global financial crisis.

It announced in May that it had repaid the last of the £163bn in emergency loans it received from the UK and US governments.

Mr Hester added in a statement: "We have continued to make the bank safer and stronger as we clean up problems of the past.

"And despite the tougher economy, these results show our ongoing businesses to be more resilient than before, with many further improvements underway."

RBS confirmed that it had dismissed a number of traders linked to the Libor rate-fixing scandal that saw fellow bank Barclays fined £290m in June.

RBS said it was continuing to co-operate with investigations, but that it was not yet possible to measure the future impact on the bank, such as the timing and amount of any fines or settlements.

The bank added that during the half-year its staffing costs fell 4% as it cut 5,700 jobs, primarily in its markets and international banking arm.

Mr Hester also told the BBC that the banking industry, "became a bit detached from society and it is coming down to earth with a bump".

He said it needed to change its culture to put customers first.

RBS also confirmed that the sales of shares in its Direct Line insurance business would take place in October.

The European Union ruled that it had to sell the business by the end of 2014 as one of the conditions of RBS securing its bailout from the UK government.

Ian Gordon, analyst at brokerage Investec, welcomed RBS's latest results.

"While MPs and regulators focus their energies on soundbites and gesture-politics, RBS management continues to make useful progress in terms of balance sheet repair," he said.

However, pressure group Move Your Money UK, which is calling for greater reform of the UK banking sector, was unimpressed.

"RBS results show just how fundamentally flawed our current banking model is," it said.