RBS Sets Aside $3.9 Billion for U.S. Mortgage Settlement -- Update
January 26 2017 - 3:13AM
Dow Jones News
By Max Colchester
Royal Bank of Scotland Group PLC on Thursday put aside an extra
GBP3.1 billion ($3.9 billion) to cover future settlements with U.S.
authorities over the sale of toxic mortgage-backed securities
before the financial crisis, offering investors hope that the
British bank is getting closer to resolving one of its last major
crisis-era litigation headaches.
The provision will likely push the 72% U.K. government-owned
bank to one of its largest annual losses since its taxpayer bailout
in 2008, further denting the bank's prospects for paying dividends
in the medium term.
RBS said the timing of any settlement with U.S. authorities
remained "uncertain." The extra provision, which will be taken as
part of the bank's full-year earnings next month, will take the
total the bank has put aside to cover the potential penalties to
GBP6.7 billion and will reduce its Tier 1 capital ratio to
13.6%.
The Justice Department is probing criminal and civil issues
related to RBS's sale of mortgage bonds at the height of the U.S.
housing boom. The additional provision is to cover that
investigation, RBS added. The bank had already earmarked $5.6
billion to pay for a settlement with the Federal Housing Finance
Agency.
Late last year Deutsche Bank AG and Credit Suisse Group AG
settled with the Justice Department over their role in the sale of
mortgage-backed securities. Barclays refused to do so and was sued
by the DOJ.
The settlement with U.S. authorities is one of the remaining
hurdles RBS must clear before the U.K. government can consider
privatizing the bank. The threat of the vast fine has been weighing
on RBS's share price for over a year. The bank's management has
repeated its desire to settle. However, on Thursday the bank said
in a statement there was no guarantee it would do so.
When RBS presents its annual results on Feb. 24. the bank will
also outline further cost-cutting measures as its executive team
continue to battle to reshape RBS amid low interest rates and a
laundry list of litigation issues.
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
January 26, 2017 02:58 ET (07:58 GMT)
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