Government-controlled Royal Bank of Scotland Group PLC on Friday reported a net loss of 1.8 billion pounds ($3 billion) despite an improvement in underlying profits and said lending to small- and medium-sized companies increased 5 percent.

Full recovery from its near collapse a year ago will take years, its chief executive Stephen Hester said.

For the three months ending Sept. 30, RBS reported total income of 7.1 billion pounds, compared to 8.6 billion pounds a year earlier.

The bank booked impairment losses of 3.3 billion pounds, up from 1.3 billion a year earlier. Impairments for the first three quarters of this year rose to 10.8 billion pounds.

Without those charges, operating profit rose 55 percent to 1.75 billion pounds.

RBS shares were up 1.9 percent at 35.87 pence on the London Stock Exchange.

Hester said the results affirmed his confidence that RBS can recover as a strong company.

"The results also show the headwinds we face and the legacy we are purposefully working out of," he said. "As I have repeatedly said, the journey will take some years."

RBS announced earlier this week that it had agreed terms for joining the government Asset Protection Scheme to guard against losses of up to 282 billion pounds on toxic assets. That move will boost the government's stake from 70 percent to 84 percent. Continued...