RBS, which is 83 percent owned by taxpayers, reported a net loss of 528 million pounds ($866 million) for the three months ending March 31.
That compared to a loss of 248 million pounds in the same quarter a year ago and a profit of 12 million pounds in the final quarter of 2010.
Total income fell 8 percent to 7.55 billion pounds. RBS reported an operating profit of 1.05 billion for the quarter, up from 882 million pounds a year ago and 55 million pounds in the previous quarter.
RBS shares were up 1.9 percent at 41.26 pence in early trading on the London Stock Exchange.
The Financial Services Authority imposed new rules on selling payment protection insurance, which are being enforced retrospectively.
The regulatory agency has estimated that the cost of compensation for all British banks will be about 4.5 billion pounds.
The British Bankers’ Association has until Tuesday to decide whether to seek permission to pursue an appeal to a lower court judgment enforcing the FSA rules.
With the legal process unresolved, RBS said it cannot yet estimate the size of its potential liability, “although it could prove to be material.” Chief Executive Stephen Hester said the bank, the biggest British casualty of the credit crisis, was making progress in recovering.
“Financial strength and resilience continue to show sharp improvement as core business profitability broadens and noncore risks are reduced,” Hester said.
“This recovery is also allowing us to absorb higher Irish impairments and substantially increased regulatory demands, and to self-fund other ‘bills from the past’ such as restructuring, disposals” and the cost of government insurance on toxic assets, Hester said.
Provisions for bad loans in Ireland rose by 1.3 billion pounds in the quarter, RBS said.
