RBS considers bid for mortgage portfolio

Royal Bank of Scotland Group is one of many prospective bidders that have shown an interest in buying Granite, a £13bn (€18.3bn) mortgage securitisation vehicle earmarked for sale by the UK government.

RBS may team up with other bidders, including private equity firms to buy Granite, or may decide to not bid at all, Sky News said.

The state-owned bank is looking to deploy some of its surplus funds through the potential purchase, and invest primarily in UK retail and commercial business to grow its position in mortgages, the website said.

Last year, RBS chief executive Ross McEwan said he would cut costs and reposition the bank as a UK-focused retail and commercial lender. If the deal goes through, it will be in line with the EU state aid deal, which restricts the bank from deals that go above a certain valuation, Sky said.

RBS could not be immediately reached for comment outside regular business hours. In March, Britain’s chancellor of the exchequer George Osborne, in an effort to woo voters before general elections, announced plans to launch the sale of £13bn of mortgage assets.

Meanwhile, Bloomberg has reported RBS could pay as much as $4.5bn (€4.1bn) to resolve claims of misconduct in its handling of US mortgage securities. RBS may be closer to JPMorgan Chase & Co’s $4bn accord with the US Federal Housing Finance Agency over its sale of mortgage-backed securities than Deutsche Bank AG’s $1.9bn deal, Elliott Stein, an analyst for Bloomberg Intelligence, wrote.

The FHFA, suing on behalf of government-owned lenders Fannie Mae and Freddie Mac, is seeking to add to more than $19bn it has s already collected in settlements from 16 other banks. Edinburgh-based RBS has set aside about £2.1bn to cover the cost of the lawsuit.

RBS is seeking to have the case dismissed, arguing the suit by the FHFA filed in 2011 came too late, according to Bloomberg Intelligence. The legal action relates to $32bn in residential mortgage-backed securities sold to Fannie and Freddie from 2005 to 2007.

Any settlement “is likely to be substantial”, CEO Ross McEwan said on a call with analysts in discussing the bank’s first-quarter earnings on April 30. A deal could come this year, but “may spill into 2016,” he said.

RBS and Nomura Holdings lost a trial in a separate FHFA case, earlier this month, in which the British lender must pay $528m and the Japanese bank $170m.


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