Gladstone Brookes | RBS makes £153 million loss after more litigation charges

RBS makes £153 million loss after more litigation charges

RBS makes £153 million loss after more litigation charges

Royal Bank Of Scotland (RBS) has reported a half year loss of £153 million after setting aside still more money for litigation costs.

But the predicted increase in their PPI provision did not materialise. The £459 million being set aside is intended for anticipated penalties by US regulators arising from the mis-selling of mortgage-backed securities in America and interest rate hedging products.

PPI refunds

The bank’s interim report stated the £100 million set aside for PPI refunds earlier in the year is considered to be enough to cover anticipated future successful claims.

RBS has set aside a total of £3.8 billion to pay PPI claims of which £3.1 billion has already been paid out. The remaining £700 million is expected to cover any new claims received before the second quarter of 2016.

Warning

But the report did include the warning that the figures were based only on assumptions.

“There are uncertainties as to the eventual cost of redress which will depend on actual complaint volumes, take-up and uphold rates and average redress costs.  Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different from the amount provided,” said the report.

A table in the report shows an anticipated uphold rate of 90% on future claims with an average payout of £1,659.

IRHP

The bank has set aside £69 million to pay compensation for mis-sold interest rate hedging products (IRHP), bringing the total payment pot to £1.5 billion.

There was a similar warning regarding the size of the allocation with the report stating: “We continue to monitor the level of provision given the remaining uncertainties over the eventual cost of redress, including the cost of consequential loss claims.”

More pain

Commenting on the report, chief executive, Ross McEwan, warned there was more pain to come as the bank was still dealing with ‘conduct issues of the past’ : “I don’t like seeing losses and I’ll not rest until these charges are behind us.”

However, he did not think the US mortgage court case would hamper any possible sale of RBS shares, saying the Treasury has acknowledged the bank is in ‘much better shape’.

Share sale

Mr McEwan refused to be drawn on the possible timing of any share sale,  saying only that the plan to offload the government’s 78% share in the bank was ‘welcome.’

Chancellor George Osborne has declared he is willing to sanction the re-privatisation of the bank, even though it will cost the taxpayer money.

Loss

Despite a 3% rise in the share price as the interim report was published, the current share price is nowhere near the £5.02p per share the Labour government paid in the bank’s 2008 bailout. Experts have calculated that a sale at current levels would mean a loss to the taxpayer of more than £7 billion.

The initial indication was that the sale could start at the end of the year, but some commentators believe the timing may have been brought forward to September.

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