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RBS sets aside £400 million to settle forex probe RBS sets aside £400 million to settle forex probe
(about 3 hours later)
State-backed lender Royal Bank of Scotland is setting aside £400 million to settle foreign exchange rate rigging allegations. Taxpayer-owned Royal Bank of Scotland has taken a £400 million hit for its role in forex market rigging allegations and warned there may well be more to come from this and other past banking scandals.
The announcement comes a day after rival Barclays said it was making a £500 million provision as it finalises talks with global regulators over the scandal. But a strong improvement in Irish property prices, lower bad debts and lower costs saw the bank swing from third-quarter losses of £634 million in 2013 to profits of £1.27 billion this year.
RBS, which is 80 per cent owned by the taxpayer after being rescued during the financial crisis, said it was putting aside a further £100 million to cover compensation payouts for customers mis-sold payment protection insurance (PPI). So-called conduct issues such as the forex scandal cost £780 million including a further £100 million for PPI mis-selling. RBS shares, which are 80 per cent owned by the taxpayer after its £45 billion bail-out, rose 14.7p to 380p — their highest level for 12 months.
It takes the lender's total bill for PPI to £3.3 billion. “We are actively managing a slug of significant legacy issues,” said chief executive Ross McEwan. “For some of them the cheques are already in the post but there are plenty more bumps in the road ahead.”
RBS said profits for the third quarter were up to £1.27 billion, compared with a loss of £634 million in the same period last year. RBS, with five other banks, is near reaching a deal with the Financial Conduct Authority and some US regulators over the forex scandal but will still have to deal with others at a later date.
It is the first time the bank has reported a profit for three quarters in a row since the financial crisis in which the bank nearly collapsed. It also has outstanding cases against it over US mortgage-backed securities and the IT collapse two years ago. McEwan said: “We cannot make any firm provisions on legacy issues until we have some fairly clear numbers and discussions going on with the regulators.”
RBS also confirmed that following a strategic review it would retain Ulster Bank, which it said remained a core part of the group. He also said RBS would not pay a dividend until its key core tier 1 capital ratio is up from today’s 10.8 per cent to above his 2016 target of 12 per cent.
Litigation and conduct costs for the third quarter "included £400 million of potential conduct costs following investigations into the foreign exchange market". He said: “There’s no way we will pay a dividend until we are well above that 12 per cent target.”
The additional £100 million set aside for PPI reflected "higher than expected reactive complaint volumes". Analysts feel there is little chance the Government will sell its first tranche of RBS shares before next year’s election.
RBS added: "Ongoing conduct and regulatory investigations and litigation continue to present challenges and are expected to be a material drag on both earnings and capital generation over the coming quarters."
Additional reporting PA