RBS to take a charge of £3.1bn

The Star Early Edition - - BUSINESS REPORT | INTERNATIONAL - Richard Part­ing­ton and Michael Moore Lon­don

ROYAL Bank of Scot­land Group said it will take a £3.1 bil­lion (R51.85bn) charge in its fourth-quar­ter re­sults, as the lender used other banks’ set­tle­ments to es­ti­mate the im­pact from a US probe into sales of mort­gage se­cu­ri­ties.

The lender is con­tin­u­ing to co-op­er­ate with the US De­part­ment of Jus­tice (DoJ) in its in­ves­ti­ga­tion, though tim­ing of a set­tle­ment re­mains un­cer­tain, the Ed­in­burgh-based bank said yes­ter­day. RBS has now taken £6.7bn of pro­vi­sions re­lated to as many as 15 mort­gage in­ves­ti­ga­tions and law­suits, and said fur­ther charges may still be needed.

RBS is among the fi­nal global lenders yet to set­tle in a years-long probe that’s gar­nered more than $50bn (R666bn) in penal­ties for the DoJ since it be­gan in­ves­ti­gat­ing the pre-cri­sis sale of mort­gage bonds.

Bloomberg re­ported last week that the UK tax­payer-owned lender was con­sid­er­ing tak­ing a pro­vi­sion based partly on Deutsche Bank’s $7.2bn set­tle­ment and Credit Suisse Group’s $5.3bn ac­cord, both an­nounced in De­cem­ber.

RBS in­vestors, in­clud­ing the UK gov­ern­ment, are pay­ing a “heavy price for de­ci­sions made by RBS be­fore the cri­sis. It’s an­other painful ex­am­ple of that legacy,” chief ex­ec­u­tive Ross McEwan said. The charge “re­flects the legacy of a time when RBS lost its way on its quest to build a global bank”.

The shares gained 1.9 per­cent to 231.8 pence at 8.38am in Lon­don trad­ing yes­ter­day. The stock de­clined by 26 per­cent last year.

Al­though the lender’s board was able to make the fresh pro­vi­sion based on other Euro­pean banks’ set­tle­ments, chief fi­nan­cial of­fi­cer Ewen Steven­son said RBS isn’t yet in any ac­tive ne­go­ti­a­tions with the Jus­tice De­part­ment.

McEwan said he wouldn’t spec­u­late on whether changes in the US ad­min­is­tra­tion un­der Pres­i­dent Don­ald Trump may change the tone of any talks or de­lay the process.

“We’re keen to re­solve this as quick as we can,” he added.

RBS’s fourth-quar­ter charge is larger than the £2.7bn that Cit­i­group an­a­lysts led by Andrew Coombs pre­dicted in a note to clients last month.

The pro­vi­sion would have re­duced the bank’s com­mon eq­uity tier 1 cap­i­tal ra­tio by 1.35 per­cent­age points based on where it stood in Septem­ber, RBS said. – Bloomberg

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