Saturday 29 October 2016

RBS reports £469m LOSS in third quarter


The Royal Bank of Scotland (RBS) reported a £469million loss in third quarter and highly likely facing a financial crisis.

The embattled bank has reported a £469m loss for the July-to-September period which it described as being down to "legacy issues".

The bank received a £45.5billion bailout from taxpayers during the financial crisis and has been tackling a range of problems for almost a decade which continue to overshadow its performance.

With restructuring costs and provision for litigation excluded from the latest figures, the bank made an adjusted quarterly operating profit of £1.3bn.

The bank - which is 73 per cent taxpayer-owned – has already spent £1.4billion on separation plans to offload branches by the end of 2017 to comply with European Union aid rules over its £45billion state bailout in 2009.

It has also repaid nearly £1.2billion to the Treasury to buy out a crucial part of its bailout – a so-called dividend access share – and took a £1.3billion hit from litigation and conduct costs.

The bank's figures will spark fears of another financial crisis as it faces further legal fees.

Earlier this month bosses were warned RBS may have to pay out as much as $27 billion, roughly the market value of the bank, in misconduct fines and lawsuits over the next few years.

That bill represents the upper end of estimates to settle a range of claims related to RBS's alleged misconduct before and during the financial crisis, including mis-selling mortgage backed securities (MBS) in the United States.

Investor concern over RBS's outstanding legal and compliance woes increased after news last month that the US Department of Justice is seeking up to $14 billion from Deutsche Bank for its role in the mis-selling of MBS in the run up to the financial crisis.

Laith Khalaf, an analyst at Hargreaves Lansdown, Britain's largest retail stockbroker, said: "The concern is that it could be another Deutsche Bank-style situation where the fines that come in are higher than the market expects.

"Litigation is a real Sword of Damocles hanging over the bank at the moment and until that is out of the way it is very difficult to see a reason to invest in RBS."

If RBS wins the court cases and the fines are at the lower end of analyst estimates, the total would be around $5.5 billion, most of which it has set aside to cover those damages.

However, analysts say the bank could have to pay the as much as 9 billion pounds ($11.19 billion) in the next few months. Even the lowest estimate of 2 billion pounds ($2.49 billion) would make it largest fine in the bank's history.



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