* CEO expects settlement with U.S. authorities by end-June
* RBS in advanced talks with authorities including DoJ
* Q1 operating profit 1.6 bln stg, up 16 percent (Recasts, adds CEO comments, details on settlement timing)
By Matt Scuffham and Steve Slater
LONDON, April 30 (Reuters) - Royal Bank of Scotland (RBS) said it expects to settle with U.S. authoritiesinvestigating alleged foreign exchange manipulation in thecoming weeks and set aside a further 334 million pounds ($515million) to cover the cost.
The new charge takes the total set aside by RBS for futureforeign exchange settlements to 704 million pounds. The bank wasfined $634 million by British and U.S. regulators last November,being one of six institutions which paid out a combined $4.3billion for failing to stop traders trying to manipulatecurrency markets.
RBS said on Thursday it was in advanced discussions over asettlement in relation to a criminal investigation conducted bythe U.S. Department of Justice and other authorities, andexpects to settle before the end of June.
Rival Barclays, which has yet to settle with anyregulators over the matter, on Wednesday set aside another 800million pounds to cover the issue.
RBS, 80 percent owned by the British government, remainshampered by a number of investigations into past misconduct,undermining its turnaround under CEO Ross McEwan who warned ofanother tough year as the bank grapples with a mammothrestructuring and the consequences of past misdeeds.
"There are still many conduct and litigation hurdles loomingon the horizon and putting these issues behind us is a vitalpart of our plan," McEwan said.
As well as foreign exchange, the bank still facesinvestigations into its treatment of struggling small businessesand its selling of bonds backed by residential mortgages (RMBS)in the United States. McEwan said he expects an RMBS settlementto come in the second half of the year.
RBS made an operating profit of 1.63 billion pounds in thefirst quarter, up 16 percent on the same period a year ago.
The improved performance was clouded by a number of one-offcharges, resulting in RBS posting an attributable loss of 446million, compared with a 1.2 billion pound profit a year ago.
It set aside 100 million pounds to cover compensation forthe mis-selling of loan insurance and 257 million pounds forother customer compensation, primarily relating to paid-foraccounts.
The bank took another 453 million pounds in restructuringcharges, mainly on the reduction in the value of its propertiesin Stanford, Connecticut, where it is cutting the size of itsU.S. investment bank.
($1 = 0.6483 pounds) (Editing by Keith Weir)