Royal Bank of Scotland (RBS) swung into a £1.5 billion operating loss for the third quarter after write-offs on bad debts nearly tripled compared with the same period a year ago.

The bank, which is now 84 per cent owned by Britain's taxpayers after receiving an additional £33.5 billion in state funding this week, said that operating losses had improved from the £3.5 billion recorded in the second quarter of this year. Shares in RBS rose 7 per cent to 37.65p this morning.

However, today's results represent a fall into the red compared with the third quarter of 2008, when the bank reported a £2.3 billion profit and when Sir Fred Goodwin, the disgraced former chief executive, was still in charge. Sir Fred was forced to resign in October last year.

RBS said today its impairment charges jumped from £1.28 billion to £3.3 billion and, for the nine months so far this year, write-offs on bad loans have risen to £10.8 billion from £2.7 billion in the same period last year.

In a conference call, Stephen Hester, the bank's chief executive, said that "legacy credit exposure" would ensure bad debts remained at a similar level to the average quarterly impairment recorded in the first half of this year - just under £4.0 billion a quarter - throughout next year, keeping RBS in the red in 2010. He said he was hopeful that the bank would return to profit in 2011.

"I have repeatedly said this is a marathon, not a sprint, and so it is proving," he said.

Mr Hester added that he was "crystal clear of having responsibility for stewardship of the investment made by the taxpayer" and was "completely focused on returning the bank to standalone strength".

"We are very clear we would like to get the Government out of RBS at a profit," he said

The biggest impairment losses fell in RBS's UK retail operation, which recorded £404 billion of bad debts and left it with a £64 million operating profit for the third quarter - more than triple the £20 million made in the second quarter but less than half the year-earlier figure of £133 million.

RBS' global banking & markets division took a £272 million writedown on bad debts, compared with £2 million a year earlier, leaving it with a £375 million operating profit, against £614 million a year earlier.

The US retail & commercial unit, which includes Citizens Group, the American retail bank, recorded a £144 million impairment in the third quarter, compared with £134 million a year earlier.

The third-quarter results mark the end of a busy week for RBS, when it received the largest bailout of any bank in the world. So far, RBS has been given £53.5 billion in taxpayers' funding and Alistair Darling admitted that the additional £33.5 billion in funds outlined this week may still not be enough to save the bank.

Under the latest bailout, the Treasury said that it would inject a further £25.5 billion of taxpayers' funds into RBS, along with a new £8 billion pot of reserves intended for emergencies only, totalling £33.5 billion. The increase in funding means Britain's taxpayer now owns 84 per cent of the bank compared with a previous 72 per cent share.

In return for state aid, and as part of an agreement with the European Commission, RBS has agreed to sell off a number of its assets, including 318 branches mainly in England and Wales, which will be parcelled up under the resurrected Williams & Glyn’s brand. It will also sell its insurance division, made up of Churchill, Direct Line and Green Flag.

The bank also said it will participate in the Government's Asset Protection Scheme, which provides state insurance against toxic debt. RBS will place £282 billion worth of bad loans into the scheme, far below the £325 billion it initially expected to have to insure.

RBS also announced a further 3,700 job cuts this week, on top of the 16,000 cuts the bank has already made public.

Today, Mr Hester admitted that the deal it made with Europe in return for state aid was "not what we wanted". Mr Hester had wanted to keep hold of the bank's insurance business. However, he said RBS now has "the tools to do our job". He added: "We greatly appreciate the steadfast support we have been given by the UK Government and taxpayers."

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

He added: "Economic recovery is likely to be slow and the pain of economic adjustment will take years to subside. Our business will reflect these issues. Profitability in our core businesses will recover fully only when our own actions are also complemented by more normal interest rates and bad debt experience."

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