Royal Bank of Scotland Posts $3B Loss

LONDON (TheStreet) -- Government-controlled Royal Bank of Scotland Group(RBS Quote) on Friday reported a net quarterly loss of 1.8 billion pounds -- or the equivalent of $3 billion -- despite an improvement in underlying profits.

On the brighter side, the bank -- which was essentially nationalized over the course of the past year, as the government bailed it out during the financial meltdown by claiming what ultimately became a 70% stake in its operations -- announced that its lending to small- and medium-sized companies increased 5%.

Earlier this week, RBS also announced that it was joining the government's Asset Protection Scheme to guard against losses of up to 282 billion pounds on toxic assets -- a move that will up the government's stake in the bank from 70% to 84%. Under the terms of that agreement, RBS will be forced to dispose of 318 branches, or 14% of its British network, within four years. It will also cut an additional 3,700 jobs, above and beyond the 16,000 in job cuts that were already planned.

Full recovery from its near collapse a year ago will take years, its chief executive Stephen Hester said. He did, however, strike several resolute notes, saying the results affirmed his confidence that RBS can recover as a strong company.

"The results also show the headwinds we face and the legacy we are purposefully working out of," he said. "As I have repeatedly said, the journey will take some years."