RBS smashes expectations with £940m profit

RBS seeks deal to avoid £4bn court action over crisis cash-call

28 July

Royal Bank of Scotland is trying to strike a deal to avoid a costly and damaging trial over a £12bn cash-call it issued at the height of the financial crisis.

It emerged last year that a range of investors, including both big-fund managers and smaller shareholders, were suing for up to £4bn, alleging that the bank's true financial position had been misrepresented in offer documents at the time.

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They bought into the bank at around £2 a share in 2008 and incurred huge losses one year later, when RBS had to be bailed out by the taxpayer to the tune of £45bn, says The Times.

Talks are understood to have been taking place since Monday and negotiator Stephen Greenberg, a specialist in commercial dispute resolution, is believed to have informed claimants that RBS wants to avoid going to court.

While a big payout would be "a further humiliation for the bank and Fred Goodwin, its disgraced former chief executive", the bank is said to fear the greater embarrassment of executives being grilled in public court proceedings, says the Times.

Disagreement between various groups of stakeholders on the scale of acceptable damages, with smaller claimants holding out for a full return on their investment plus costs, is thought to be one obstacle to a deal.

But larger investors such as Legal & General and Standard Life are believed to be willing to entertain a return of 40p per share. There are suspicions they knew more about RBS's true position than they have let on and want to avoid questions from their clients if the issue were to come out in court.

The Times says "seventeen of these 'insider' institutions that held a series of meetings with RBS in early 2008 have been identified during the legal process".

A judge ruled last year that a trial would be delayed to March 2017, after RBS's legal teams struggled to deal with 25 million relevant documents from thousands of shareholders.

This is just one legal headache of many for the state-backed bank. It is also facing a penalty that will likely run into billions of dollars from US regulators over boom-era mortgage securities, while at home, it is defending legal claims over Libor rigging and alleged VAT fraud on carbon credits.

Brexit delays RBS sell-off plans by 'a couple of years'

05 July

Royal Bank of Scotland will take around two years longer to be returned to the private sector as a result of the hit to the bank from the Brexit vote, says chief executive Ross McEwan.

"This will be a setback, let's be honest. I think at least a couple of years it will be pushed back," he told LBC yesterday.

Shares in companies deemed exposed to an economic downturn, including banks, have been hammered since the results of the EU vote. RBS's stock has slumped around 36 per cent, based on the share price at around 2.30pm this afternoon in London. At 161.4p, it is also less than a third of the 502p at which the then Labour government paid for the bank in 2009.

Fellow state-backed bank Lloyds has seen its stock dive 28 per cent since the referendum.

RBS is still around 73 per cent owned by the taxpayer, after a first tranche of shares were sold last year. At 330p, the disposal crystallised a loss of £1bn on the original bailout, but even this price, which is double the value of the shares today, seems a long way off.

The Financial Times says the sale of the bank's shares was set to raise £29bn for the government over the coming five years.

This would have been used pay down the national debt and is another blow to Chancellor George Osborne, who has also been forced to row back on his pledge to return the day-to-day budget to surplus by 2020.

Elsewhere, McEwan repeated his stance that the bank would move its headquarters from Edinburgh to England in the event that Brexit triggers a successful second independence referendum.

But according to the BBC, he said this was effectively about "moving the plaque rather than any of our people".

Fred Goodwin will not face charges over RBS failure

13 May

Former Royal Bank of Scotland chief executive Fred "the Shred" Goodwin and his fellow directors have escaped charges in Scotland over its collapse during the financial crisis.

The Crown Office and Procurator Fiscal Service said "a team of specialist forensic accountants and banking experts had examined 160,000 documents" before concluding there was "insufficient evidence of criminal behaviour", reports The Guardian.

Prosecutors had focused on a £12bn cash call on investors in early 2008, which failed to prevent the bank's near-collapse and the need for a £45bn bailout by taxpayers later that year. It is likely that RBS's eventual return to the private sector will see the government take a hit of up to £20bn on that investment.

A highly controversial figure, Goodwin earned his unflattering sobriquet for his reputation for ruthless cost savings during aggressive expansion on his watch, which saw RBS become the largest bank in the world after the takeover of Dutch rival ABN Amro in 2007.

It is now known, however, that the bank had over-reached and was overly exposed to the irresponsible loan products that turned toxic during the credit crunch. Goodwin was stripped of his knighthood in 2012.

Despite a report in 2011 that pointed to "multiple poor decisions" in the lead up to the failure of RBS, the financial regulator concluded in 2010 that there were no grounds to take up enforcement action that could have resulted in hefty fines against Goodwin or any other RBS executives for their role in the bank's demise.

The continued failure to bring any action was a "monumental injustice", Unite, the union representing RBS workers, told the Financial Times, while Labour MP John Mann, who sits on the Treasury committee, said: "This demonstrates that the law is nowhere near strong enough."

Rules for bank executives have been toughened since the financial crisis and they are now required to take action to prevent breaches, although plans have been dropped that would have put the burden of proof for compliance onto accused execs themselves, despite making it all the way to the final publication of the new framework.

Yesterday, David Cameron announced that a new law would be created making all executives, including those of banks, responsible for any corrupt or fraudulent activities in which their companies are found to have engaged.

RBS losses double to almost £1bn in first quarter

29 April

Royal Bank of Scotland has posted a loss of nearly £1bn for the first quarter of 2016 – more than double that of the same period last year.

The bank, which is 73 per cent owned by the taxpayer, was hit by a one-off payment of £1.2bn to the Treasury to lift a block on dividend payments.

It posted a net loss of £968m for the first three months of the year, worse than the £957m expected by analysts and double the £459m it lost in the same period last year.

With the Treasury payment stripped out, however, the bank made a profit of £421m - up from the £37m operating profit it made in the same quarter of 2015 and a better performance than the £51m underlying loss that had been expected.

This improved performance came thanks to cheaper-than-anticipated restructuring costs, says the Financial Times, and the bank also set aside less to cover the expenses of litigation and fines for mis-selling PPI than it had expected.

Chief executive Ross McEwan launched a radical restructuring plan in February, adds the FT, announcing the bank will sell its overseas businesses and scale back its investment arm.

But restructuring costs came in at just £238m for the quarter, barely half of last year's costs in the same quarter, and the bank set aside just £31m for conduct and litigation expenses.

RBS is now allowed to start paying dividends back to its shareholders, says the BBC, but McEwan has warned he does not expect to be able to do so for at least a year.

The chief executive said yesterday that selling off RBS subsidiary Williams & Glyn, as demanded by the European Union, was taking much longer than expected, continues the BBC. He also warned RBS might miss the deadline of the end of 2017 to do so.

McEwan blamed the delay on the "very challenging" task of creating a technology platform to support the bank on its own and added that the process could end up costing £1.7bn more than originally expected.