Royal Bank of Scotland has reported a net quarterly loss of £1.8 billion and said it expected a slow recovery, despite massive state support.
The announcement comes just days after the British government increased its stake in RBS to 84 per cent, having decided to pump billions more pounds into the bank, making the rescue the world's biggest bank bailout.
The net loss during the three months to September 30 of £1.8 billion (€2 billion) compared with profit after tax of £871 million during the third quarter of 2008.
Bad debts stood at £3.279 billion in the July-September period.
RBS chief executive Stephen Hester said that the bank's recovery would be slow, closely mirroring the global economy's return to strength after recession.
"Economic recovery is likely to be slow and the pain of economic adjustment will take years to subside. Our business will reflect these issues," said Mr Hester.
Despite the deep net loss, the share price of RBS jumped 6.15 per cent to 37.38 pence on London's benchmark FTSE 100 index, which was up 0.15 per cent to 5,133.54 points in midday trade.
"Positive news for Stephen Hester is that the core retail banking operations are profitable," said ETX Capital senior trader Manoj Ladwa.
RBS meanwhile reported a third-quarter operating net loss of £1.525 billion. Royal Bank of Scotland has been ravaged by the credit crunch and the 2007 takeover of Dutch group ABN Amro at the top of the market.
The troubles at RBS have meanwhile led to a boardroom shake-up with Mr Hester replacing disgraced former chief executive Fred Goodwin, who last year led the bank to Britain's biggest annual corporate loss of more than £24 billion.
Earlier this week, the British government said it would force RBS and another state-rescued bank, Lloyds Banking Group, to sell assets in a massive shake-up for Britain's banking sector.
The state also agreed to pump an extra £25.5 billion into RBS, which in turn said it would place £282 billion of high-risk debts into the government's toxic-asset insurance scheme.
As a result of the move, the state's economic interest in RBS is climbing to 84 per cent from 70 per cent.
Britain expects new banks to be born as a result of the break-ups which are the result of pressure from EU competition authorities.
The parts being separated from the parent groups add up to about 10 per cent of Britain's troubled retail banking market, which suffered further casualties as global giant HSBC said it was axing 1,700 posts.
In return for more state aid, Lloyds and RBS will have to cut bonuses paid to top staff and increase lending to businesses and individuals in recession-hit Britain.
Lloyds meanwhile said it would launch a record £13.5 billion rights issue, representing the biggest-ever sale in Britain of new shares to existing shareholders.
The week's announcements come soon after the European Commission approved the state aid used in plans to break up and sell Britain's nationalised bank Northern Rock.