State-rescued Royal Bank of Scotland on Friday said net losses had narrowed to £466 million ($723 million, 594 million euros) in the second quarter compared with the equivalent period one year earlier.
RBS, 82-percent owned by the British government after a massive bailout amid the global the financial crisis, had posted a loss after tax of £897 million in the April-June period last year, the lender said in a statement.
RBS was hit in the quarter by charges totalling £310 million linked to an IT meltdown and funds set aside to compensate clients who were mis-sold various products.
The bank is also on alert in case it is hit by the Libor rate-rigging scandal which has wreaked havoc at British rival Barclays.
"The LIBOR situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact," RBS said on Friday.
"This is the subject of ongoing regulatory investigation but our customers and shareholders should be in no doubt that we are taking it seriously," it added.
"These issues together are hard to deal with but just as necessary a part of change from the past as the restructuring of our balance sheet."
The bank added that its half-year loss surged 40 percent to £1.99 billion following an accounting charge of £2.97 billion on changes to the value of its debt.
The bank's underlying performance was rosier, showing a first-half operating profit of £1.8 billion "despite a worsening economic backdrop and the further restructuring," said RBS chief executive Stephen Hester.
Hester on Monday said Royal Bank of Scotland faced the prospect of fines linked to the Libor interest rate-rigging scandal.
"RBS is one of the banks tied up in Libor. We'll have our day in that particular spotlight as well," Hester told The Guardian newspaper.
In June, Barclays became the first bank to be fined as part of a global probe into suspected manipulation of the twin interest rates that are crucial to the operation of short-term financing and global markets.
Barclays was fined £290 million by British and US regulators for attempted manipulation of Libor and Euribor interbank interest rates between 2005 and 2009.
The fallout saw the resignations of three Barclays executives, including CEO Bob Diamond and some analysts are predicting that Barclays could face lawsuits costing it billions of pounds in costs and fines.