ROYAL Bank of Scotland said it expected to make a loss for 2015 after setting aside £2.5 billion to cover legal claims, payment protection insurance and a writedown on its private banking business.

The government-backed group – which has not made an annual profit for seven years and is due to report full year results on 26 February – also announced it is speeding up plans to pay £4.2 billion into its main pension scheme to plug an accounting deficit.

"I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank,” said RBS chief executive Ross McEwan.

RBS said it was setting aside another £1.5 billion for litigation claims in relation to the selling of US residential mortgage-backed securities, taking the group's total provision to £3.9 billion.

However, the bank warned that no provisions have been made towards resolving the ongoing investigations by the US Department of Justice and various US attorneys general into its past conduct in relation to residential mortgage-backed securities.

"The costs of resolving these investigations could individually or in aggregate prove to be substantial, RBS said.

The bank is also setting aside an extra £500m to cover anticipated further payment protection insurance mis-selling claims ahead of a 2018 deadline for final claims proposed by the regulator, the Financial Conduct Authority.

"At this stage we think it is hopefully the end,” Mr McEwan said of the PPI debacle. “It has been a long, torturous saga for many banks. It is a good lesson for the industry on dealing with customers fairly."

Away from past conduct issues, RBS expects to book a £498m goodwill impairment charge in the fourth quarter of 2015 for its private bank, best known for the Coutts & Co brand. A spokesperson said this goodwill dated back to RBS’s acquisition of NatWest in 2000 and related to factors including lower interest rates hitting profitability, a higher tax rate and pressure on margins.

The £4.2 billion payment into the group's main pension scheme, which has 220,000 members and was closed to new employees in 2006, was mostly due to a change in the bank's accounting policy and followed updated international guidance on minimum funding requirements. The payout will add an additional £1.6bn in costs to RBS’s 2015 accounts, but would not affect the bottom line.

The combined costs will knock £3.6bn from RBS' capital buffers.

“We will now continue to move further and faster in 2016 to clean-up the bank and improve our core businesses,” Mr McEwan said. “We've always been open about the scale of past issues facing RBS and although there is clearly much more to do, this announcement is a further step towards addressing legacy issues and building a great bank for our customers and delivering long term value for our shareholders."

The UK government remains a majority shareholder in RBS with a 72.9% stake. But Chancellor George Osborne is keen to offload the government’s shareholding during the course of this Parliament. UK Financial Investments, the Treasury-backed body which manages the government’s investments in RBS and Lloyds Banking Group, sold a 5.4% holding in RBS last August for a third below the price it paid.

Ian Gordon, an analyst at Investec, said the extra costs were a negative for RBS but added: “On the more positive side, despite all the above, RBS will still print a core tier one ratio of about 15 per cent for 2015 year end, which will be the strongest of any FTSE 100 bank. So investors should still anticipate a very substantial share buyback in 2017.”

Citigroup predicted ‘significant additional litigation charges’ in 2016, on top of the charges announced yesterday.

It also expects earnings to be hit by the introduction of the UK bank tax and continued low interest rates, as this affects the bank’s ability to profit from assets.

RBS shares were down 2.87 per cent to 253.46p in afternoon trading.