RBS to take a charge of £3.1bn

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