Royal Bank of Scotland is the latest bank preparing for a fine for rigging the currency markets, by setting aside £400m to cover the cost of the investigation into the £3.5tn-a-day market.
The 81% taxpayer-owned bank is also adding £100m to its provisions to cover the cost of mis-selling payment protection insurance, following responses by other high street banks to increased applications for compensation in what is already the costliest mis-selling scandal in history.
Another £180m is earmarked for other penalties including the IT meltdown in 2012, which left customers locked out of their accounts, including those at Ulster Bank who were affected for more than three weeks.
RBS said it expected to enter settlement talks with the Irish regulators at the end of the year. The provision for foreign exchange rigging follows moves by Barclays and the US bank Citigroup to put millions of pounds aside to cover the potential penalties from regulators in the US and the UK.
The decision to allocate funds indicates that the banks believe that the penalties could be imposed soon; a co-ordinated settlement with up to six banks is expected next month.
Ross McEwan, a year into his role as chief executive of the bailed-out bank, acknowledged that the fines would continue to dent RBS’s reputation, but highlighted improved results.
“We have said for some time that some of the bills are already in the post,” said McEwan, who added that the total provision of £780m was the current best estimate. Further bills could come to settle litigation for mortgage bonds sold in the US ahead of 2007 credit crunch.
He said: “We are reducing costs, and are on track to achieve our capital targets. UK and Ireland are showing signs of growth, and impairment trends are significantly better than we had anticipated at the start of the year.
But we know we still have a long list of conduct and litigation issues to deal with and much, much more to do to restore our customers’ trust in us.”
McEwan refused to give any assurances that the cost of paying out fines would be borne by the staff through a cut in bonuses rather than by shareholders although he said there would be a “process” and that “people need to be accountable for these things”.
He said it had been a “tough year for staff” after publishing data showing that the number of staff who thought RBS was a “great place to work” had fallen to 72% in the third quarter from 78% at the start of the year.
Profits at RBS in the three months to the end of September were £1.3bn, compared with a £634m loss during the same period a year ago. For the nine-month period, profits were up, to £3.9bn, against £740m a year ago.
RBS has been reviewing its ownership of Ulster Bank, which McEwan said “remains a core part” of the bank despite having blown a £15bn hole in RBS’s accounts since the 2008 bailout. “We have a good market position and believe that, with investment, Ulster Bank can deliver attractive shareholder returns in the future,” he added.
RBS has released provisions previously set aside for bad debts of £801m in the last quarter, compared with £93m in the previous quarter – largely from Ulster Bank and its bad division. It also expects to release further provisions in the last quarter of the year.
“The outlook for 2015 remains relatively benign, albeit with some risks to the downside. At such low levels of impairments there may be volatility in any quarter,” the bank said.
The shares rose 3% to 376p, although remain below the average price of 502p at which taxpayers spent £45bn buying shares in 2008 and 2009.
theguardian.com
The 81% taxpayer-owned bank is also adding £100m to its provisions to cover the cost of mis-selling payment protection insurance, following responses by other high street banks to increased applications for compensation in what is already the costliest mis-selling scandal in history.
Another £180m is earmarked for other penalties including the IT meltdown in 2012, which left customers locked out of their accounts, including those at Ulster Bank who were affected for more than three weeks.
RBS said it expected to enter settlement talks with the Irish regulators at the end of the year. The provision for foreign exchange rigging follows moves by Barclays and the US bank Citigroup to put millions of pounds aside to cover the potential penalties from regulators in the US and the UK.
The decision to allocate funds indicates that the banks believe that the penalties could be imposed soon; a co-ordinated settlement with up to six banks is expected next month.
Ross McEwan, a year into his role as chief executive of the bailed-out bank, acknowledged that the fines would continue to dent RBS’s reputation, but highlighted improved results.
“We have said for some time that some of the bills are already in the post,” said McEwan, who added that the total provision of £780m was the current best estimate. Further bills could come to settle litigation for mortgage bonds sold in the US ahead of 2007 credit crunch.
He said: “We are reducing costs, and are on track to achieve our capital targets. UK and Ireland are showing signs of growth, and impairment trends are significantly better than we had anticipated at the start of the year.
But we know we still have a long list of conduct and litigation issues to deal with and much, much more to do to restore our customers’ trust in us.”
McEwan refused to give any assurances that the cost of paying out fines would be borne by the staff through a cut in bonuses rather than by shareholders although he said there would be a “process” and that “people need to be accountable for these things”.
He said it had been a “tough year for staff” after publishing data showing that the number of staff who thought RBS was a “great place to work” had fallen to 72% in the third quarter from 78% at the start of the year.
Profits at RBS in the three months to the end of September were £1.3bn, compared with a £634m loss during the same period a year ago. For the nine-month period, profits were up, to £3.9bn, against £740m a year ago.
RBS has been reviewing its ownership of Ulster Bank, which McEwan said “remains a core part” of the bank despite having blown a £15bn hole in RBS’s accounts since the 2008 bailout. “We have a good market position and believe that, with investment, Ulster Bank can deliver attractive shareholder returns in the future,” he added.
RBS has released provisions previously set aside for bad debts of £801m in the last quarter, compared with £93m in the previous quarter – largely from Ulster Bank and its bad division. It also expects to release further provisions in the last quarter of the year.
“The outlook for 2015 remains relatively benign, albeit with some risks to the downside. At such low levels of impairments there may be volatility in any quarter,” the bank said.
The shares rose 3% to 376p, although remain below the average price of 502p at which taxpayers spent £45bn buying shares in 2008 and 2009.
theguardian.com
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