Royal Bank of Scotland is expected to report a fifth successive year of losses on Thursday, hit this time by the spiralling cost of compensating customers mis-sold loan insurance and complex hedging products.
Analysts expect the part-nationalised bank to make a pretax loss of about 3.4 billion pounds ($5.2 billion), according to Thomson Reuters I/B/E/S Estimates, with the performance also reflecting losses on the value of its own debt.
Within that result RBS is expected to increase the 1.7 billion pounds it has set aside to compensate customers wrongly sold payment protection insurance (PPI) and to say it faces a bill of several hundred million to settle claims that it wrongly sold interest rate swaps to small firms, industry sources said.
The bank, which is 82 percent owned by the taxpayer, is under pressure to shape up so that the government can start selling its shares but has endured a string of setbacks including fines of 390 million pounds for its part in the Libor interest rate-setting scandal.
These have overshadowed Chief Executive Stephen Hester's progress in returning the bank to financial health although it has shed assets worth over 800 billion pounds since Hester began the job of repairing the bank's balance sheet after its 45.5 billion-pound bailout in 2008.
RBS is also expected on Thursday to outline plans to sell off a stake in its U.S. business Citizens and, according to a source familiar with the matter, will say its preferred option is an initial public share offer in New York to sell about 20-25 percent of the business.
Britain's financial regulator has put pressure on RBS to sell Citizens which analysts say could be worth between $9 billion and $15 billion to bolster its capital and concentrate on domestic lending.
The bank is also expected to say on Thursday that it will further reduce the size of its once mighty investment bank division even though it has already been cut back heavily and now accounts for only 20 percent of operating profits, compared with around half in 2007.
Hester plans to complete his five year restructuring plan in 2013 leaving the bank ready for the government to start selling its shares prior to the next general election in 2015.
RBS has floated the idea of a share sale in four tranches over a 10-year period. However, the timing and structure of the sale would be up to the government, which is according to media reports considering various options including giving shares away or selling shares to the public at a discount.
Taxpayers are currently sitting on a loss of about 14 billion pounds based on Wednesday's closing share price of 346 pence.
(Editing by Greg Mahlich)