Part-nationalised RBS swung to a loss in the first half of 2011, blaming exposure to Greece and compensation for the payment protection insurance (PPI) mis-selling scandal.

The FTSE 100 giant posted a pre-tax loss of £794 million for the six months to end of June, which was in stark contrast to the £1.2 billion profit it reported for the same period in 2010.

The figure also highlighted just how much the bank suffered in the second quarter, with its pre-tax loss widening from £116 million to £678 million on a quarter-to-quarter basis.

Shares in the bank slumped to a 12-month low, with investors spooked by the results, as well as renewed concerns over the global recovery. In early trading, RBS fell over 15 per cent to 25.65p, around half of its value in the past year.

RBS, which is 83 per cent-owned by the taxpayer, had previously announced it was setting aside £850 million to cover compensation claims from customers mis-sold PPI. However, it revealed a second-quarter provision for impairment against Greek government bonds, set at £733 million, was also booked. 

However, the provision for PPI claims was lower than those of rivals Barclays and Lloyds Banking Group, which had set aside £1 billion and £3.3 billion respectively.

One small bright spot was a reduction in impairment losses, which fell from £2.1 billion to £1.7 billion for the first half, but this provided little respite from the rest of a dire set of figures.

Total revenue fell from £15.5 billion to £14.3 billion in the six-month period to 30 June, with RBS's investment banking arm, Global Banking & Markets, hit by 'weaker client activity across all trading desks and active risk reduction'.

Stephen Hester, the bank's chief executive, tried to remain upbeat: 'Economic and regulatory headwinds may be challenging, but the momentum that our people and restructuring actions have sustained thus far in the RBS recovery plan should continue to stand us in good stead.'