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LONDON (AFP) - Royal Bank of Scotland reported a net quarterly loss of 1.8 billion pounds on Friday 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 percent, 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 pounds (2.0 billion euros, 3.0 billion dollars) compared with profit after tax of 871 million pounds during the third quarter of 2008.

Bad debts stood at 3.279 billion pounds 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 Hester.

Despite the deep net loss, the share price of RBS jumped 6.15 percent to 37.38 pence on London's benchmark FTSE 100 index, which was up 0.15 percent 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 pounds.

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 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 pounds.

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 pounds into RBS, which in turn said it would place 282 billion pounds 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 percent from 70 percent.

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 percent of Britain's troubled retail banking market, which Tuesday 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-pound 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.