Royal Bank of Scotland set for ninth consecutive annual loss
ROYAL Bank of Scotland is heading for its ninth consecutive annual loss after setting aside a further £3.1billion to settle claims that it mis-sold mortgage-backed securities in the US ahead of the financial crisis.
More than 70 per cent of RBS is owned by the British taxpayer
The latest provision means the lender, more than 70 per cent owned by the UK taxpayer after its £45 billion bailout, has now set aside £6.7 billion to cover the cost of the scandal.
Shares in RBS, already £2.5 billion in the red for the first nine months of the year, rose 5½p to 233p on hopes that it signalled a settlement with America’s Department of Justice (DoJ) could be lower than feared.
But the bank warned: “RBS emphasises that further substantial additional provisions and costs may be recognised and, depending on the final outcome, other adverse consequences may occur.”
RBS chief executive Ross McEwan admitted it had suffered from “misplaced ambition” in the past as it embarked on a quest to build a global bank, and the provisions were “another painful example of the cost of that legacy”.
He said: “It’s clear to me that RBS became detached from the consumer-focused values that has to be at the heart of any bank.
Putting our legacy litigation issues behind us remains a key part of our strategy. “It is our priority to seek the best outcome for our shareholders, customers and employees.
Mr McEwan claims RBS became detached from its consumer-focussed values
It's not a pretty picture for RBS: Analyst
It’s clear to me that RBS became detached from the consumer-focused values
“Once these issues are behind us, we can focus 100 per cent of our efforts on our core bank and serving our customers better.”
Late last year, Germany’s Deutsche Bank and Swiss group Credit Suisse agreed to settle similar claims with the DoJ, paying a combined £9.9 billion.
The settlement with US authorities is one of the key hurdles that RBS must clear before the Government can look to sell it back fully into private hands.
Shares in RBS are already £2.5bn in the red for the first nine months of the financial year
A reduction of the taxpayer stake looks unlikely in the near-term after Chancellor Philip Hammond said he regards it as a “long-term asset”.
Investec analyst Ian Gordon noted that, with Prime Minister Theresa May due to meet US President Donald Trump today, “it would be nice to think that the recent improvement in UK/US relations could be harnessed to expedite an RBS regulatory settlement on equitable terms. Time will tell.”