THE state-owned banking group Royal Bank of Scotland fell back into the red again in the third quarter of the year.

The banking group made a pre-tax loss of £8 million for the July-to-September period after it took a £900m charge for PPI.

The return to a quarterly loss – the first since the last quarter of 2017 – presents a challenge for Alison Rose, who will replace outgoing chief executive Ross McEwan just as the UK prepares to leave the European Union.

As well as the £900m PPI hit, RBS’s investment banking arm, known as NatWest Markets, reported a £193m loss for the quarter as it felt the impact of a “deterioration in economic sentiment for the global economy and a fall in bond yields”.

The good news for RBS, which the Conservative Government wants to sell back to the private sector, is that this may be the final charge emerging from the PPI scandal in which customers were sold insurance they did not need. There had been a huge surge in claims for compensation ahead of the August 29 deadline for claims set by the Financial Conduct Authority but these should all be settled by the end of the year.

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RBS finance director Katie Murray said it was too soon to say this was the end of the PPI saga, given the volume of claims the lender was still working through. She said: “I think it would be very brave … to say the line was completely drawn under it but this is certainly our best estimate.”

She added: “These results demonstrate our solid underlying performance in a tough operating environment. The core retail and commercial bank continues to perform well, and we are making good progress against our targets for the year.

“We have seen strong growth across the business and our sustained high levels of capital and liquidity mean we are well positioned to support our customers in these uncertain times.”

Murray also refused to single out Brexit as the cause of deterioration in growth forecasts. She said: “The economic indicators have got that much worse since the end of June.

“It really is sort of the growing volatility in the economics that we see rather than something politically tied towards Brexit, I think it’s important to have the separation.”

John Moore, senior investment manager at Brewin Dolphin, said: “The last set of results for RBS were a watershed moment for the bank, confirming it is on the road to redemption.

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“Whilst this remains the case, today’s statement highlights the legacy issues that the bank, and many of its peers, still face – in particular, PPI claims have pushed RBS back to a loss.

“Despite these bumps on the road, RBS is a very different bank to what it once was and continues to make good progress on a path to recovery.”

Joe Dickerson, analyst at Jefferies, said the performance of NatWest Markets was “deplorable” and Rose would come under pressure to further restructure the overall business.