RBS posts $8.7 billion loss in ninth straight year without a profit

By Andrew MacAskill and Lawrence White

LONDON (Reuters) - Royal Bank of Scotland reported a sharp rise in losses on Friday as higher misconduct charges and restructuring costs underscored the challenges facing the lender nine years after it was bailed out in the world's biggest bank rescue.

RBS, which has not made an annual profit since 2007, booked 6.96 billion pounds ($8.74 billion) of losses for 2016, against a 1.98 billion pound loss in the same period a year earlier.

Once, briefly, the world's largest bank by assets, RBS is in the midst of a vast, multi-year restructuring of the bank, which includes asset sales, job cuts and wading through a series of legal scandals.

"This is a bank that has been on a remarkable journey. We still have further to go. But the next three years will not be the same as the past three," Chief Executive Ross McEwan said in a statement.

RBS said 2017 will probably be the final year the bank makes a loss as it moves nearer to closing the darkest chapter in its 290-year history, which has seen it rack up more than 58 billion pounds in losses so far.

The Edinburgh-based lender also announced plans to cut 750 million pounds of costs next year to help offset the challenge of a low interest rate economy that makes it harder for the bank to make money.

Although RBS did not specify where the cuts would fall they are expected to partly hit its branch network where the bank has already eliminated thousands of roles as more customers bank online.

Total income was moderately down, with the jump in losses mainly driven by a 5.9 billion charge of misconduct issues relating to its behaviour in the run up to the 2007-2009 global financial crisis.

RBS took charges to set aside money to cover legal cases in the U.S. where analysts expect it to pay the biggest regulatory penalty in its history for mis-selling U.S. securities backed by toxic mortgage loans.

Analysts have estimated the bank could have to pay the U.S. Department of Justice as much as 9 billion pounds this year.

RBS was the only British lender to fail the Bank of England's stress test in 2016, a sign of how the bank's future is still being dictated by its past.

In some rare good news for RBS, the British government is pushing to free the bank from an obligation to sell more than 300 branches in an effort to end a seven-year struggle to sell the unit to meet European Union state aid demands.

The British government, which owns more than 70 percent of RBS, has said it will not resume selling its stake until the bank settles its U.S. fine and resolves its state aid demands.

($1 = 0.7962 pounds)

(Reporting By Andrew MacAskill and Lawrence White; Editing by Rachel Armstrong)