RBS allocates £3.1bn to cover fund against legal and compensation claims
Eight top executives, including Chris Sullivan, head of the corporate unit, and Les Matheson, acting head of the consumer division, won’t now receive bonuses for 2013, Edinburgh-based RBS said statement yesterday.
Chief executive Ross McEwan already waived his.
The provision includes £1.9bn (€2.3bn) for lawsuits and fines tied mostly to the sale of €66bn of mortgage-backed securities from 2005 to 2007. The bank is alleged to have misled buyers about the quality of the loans underlying the bonds.
Mr McEwan’s attempt to overhaul the lender by eliminating assets and jobs is being hobbled by the cost of past regulatory missteps. Mr McEwan, who replaced Stephen Hester in October, said in November his plan would lead to £4.5bn (€5.4bn) of writedowns in the fourth quarter.
More than five years after giving RBS the biggest bank bailout in history, the British government is still struggling to cut its 80% stake.
“This looks like a new CEO’s attempt to clear the decks and draw a line under the matter,” said Joseph Dickerson, analyst at Jefferies International in London, with a buy recommendation on the stock. “It seems like the higher end of expectations for the mortgage settlement.”
The stock fell 2.2% to 332.2p in London trading, below the 407p price at which the British government says it would break even on its holding.
The total includes £465m (€563m) for customers sold insurance on loans they didn’t require, £500m (€606m) for clients wrongly sold interest-rate hedging products, and £200m (€242m) for legal expenses.
“The path ahead for RBS is much clearer,” McEwan said. “We have restored our fundamental soundness and have the financial strength to deal with issues like this. We will now become a much simpler, more effective bank for our customers and shareholders.”
— Bloomberg
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