Analysts had expected the bank to make a loss of around £300m.
The Telegraph reports that mortgage application numbers increased by 43 per cent on the year, pushing RBS’ share of the new mortgage loan market up to 9.7 per cent, and helping to maintain revenues in the retail banking arm.
At the same time chief executive Ross McEwan said he and his team have stripped £800m out of the bank’s annual cost base, helping improve the profit numbers further.
However, misconduct and litigation costs are still a major drag on the bank, costing it £459m in the quarter, while RBS also took a hit of £1.05bn from continued restructuring costs.
Mr McEwan said these costs are still not over.
“One word of warning – this will continue to be a noisy year as we continue to go further and faster on restructuring and continue to deal with conduct issues of the past,” he said.
One major cost will be the settlement with US authorities over toxic loan portfolios from the pre-crisis years. These retail mortgage-backed securities (RMBS) could cost the bank as much as $10bn.
RBS has not yet begun talks with the regulator, and as such has this unknown cost hanging over it for the forseeable future.
Chief financial officer Ewen Stevenson said he hoped to start negotiations within the next six to 12 months.
He also said the bank does not expect to start paying dividends until the first quarter of 2017, disappointing those investors who had thought a 2016 dividend could be a possibility.
RBS wants to start paying dividends when its capital buffer increases to above 13 per cent, a threshold which is close as the buffer rose to 12.3 per cent this quarter.
However, that is likely to be delayed by the annual cycle of stress tests run by the Bank of England, Mr Stevenson said.
RBS’ capital position has to get the thumbs up from the regulators before it can pay out its excess capital in dividends or share buybacks, and so expects to have to wait until after the stress tests in November 2016 before it gains that official approval.
