Royal Bank of Scotland has announced a third quarter pre-tax profit of £2bn, compared to a loss of £1.6bn in the same period last year.

For the year-to-date RBS saw pre-tax profits of £1.2bn.

Operating profits at the firm, which is 83 per cent owned by the taxpayer following a state bailout in 2008, were down from £726m during the third quarter of 2010 to £267m.

The bank says this reflected a “challenging quarter in global banking and markets which maintained a cautious risk appetite in a very subdued operating environment.”

Stephen Hester, group chief executive of the Group, said retail and commercial businesses were doing well but the investment bank had only been modestly profitable.

Revenue for the firm’s investment arm fell by 29 per cent to £1.1bn and the sector is forecast to see further job cuts.

He said: “RBS’s third quarter results show the improved strength and resilience we have built up since 2008.

“RBS will take clear action to adjust strategy where needed in the light of new economic and regulatory realities. The foundation established since 2009 helps us immeasurably.

“The path ahead is navigable and we are committed to delivering the best of RBS for customers and shareholders.”

However, he said external pressures facing banks were “making the road to recovery longer and bumpier than hoped for” and he expected difficult conditions to continue into Q4.