The City is expecting Royal Bank of Scotland to report a second consecutive quarter of profit this week, despite new costs incurred during the last three months.
Following a £259m profit in the first quarter of 2017, a consensus of analysts found that RBS is expected to be £343m in the black when it reports its next set of earnings on Friday.
But the bank, which is 72 per cent owned by the taxpayer, is also expected to book £248m in conduct and litigation costs in the three months to 30 June.
Hargreaves Lansdown senior analyst Laith Khalaf noted that conduct and litigation costs are expected to total £2.2bn over 2017 as a whole, “pushing the bank into a 10th consecutive year of reported losses”.
He added: “However, much will depend on the timing, and the extent, of any action from the US Department of Justice, which is an unpredictable amount of heartache waiting for RBS shareholders in the not too distant future.
“While the figure is unknown, it also presents a major hindrance for RBS when it comes to passing the Bank of England’s stress test.”
RBS reached a £4.2bn settlement with the Federal Housing Finance Agency earlier this month over mis-selling of mortgage securities. Investors are now waiting to learn how large a related fine from the Department of Justice will be.
Khalaf noted that RBS is also expected to report around £1.2bn of restructuring costs this year, down from £2.1bn last year, but “still a large number”.
Graham Spooner, investment research analyst at the Share Centre, said: “The share price has trended higher this year as investors start to see light at the end of what has been a very long tunnel. Investors will be hoping that the group remains on track with its forecast to return to profit next year.”