RBS to pay another $5 billion to settle DOJ toxic mortgages probe

RBS sign

The Royal Bank of Scotland has reached a tentative deal with the U.S. Department of Justice, reportedly worth $4.9 billion, to settle potential civil claims over the bank's structuring and sale of residential mortgage-backed securities before the financial crisis, the agency confirmed Wednesday.

Of this amount, US$3.46bn will be covered by existing provisions with an incremental charge of US$1.44bn (€1.21bn).

Ross McEwan, its chief executive, said that a proposed settlement would allow the bank to resolve a significant remaining legacy issue and was the price the bank and the British taxpayer had had to pay for the "global ambitions pursued by this bank before the crisis".

The RBS deal isn't final, of course, and negotiations can shift at the last minute.

The prospect of a heavy fine by United States authorities made the government reluctant to sell shares in the bank bailed out by UK tax payers after the 2008 financial crisis.

The US Attorney's Office in MA, which led the probe, confirmed it had reached an agreement in principle with RBS that would resolve potential civil claims related to mortgage-backed securities that were issued from 2005 to 2008.

Accern also assigned news stories about the financial services provider an impact score of 44.8826495689191 out of 100, meaning that recent media coverage is somewhat unlikely to have an effect on the stock's share price in the near future.

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Royal Bank of Scotland's shares rose as much as 6 per cent on Thursday after the bank reached a $4.9 billion settlement with US authorities, opening the way for its privatization and return of cash to taxpayers who bailed it out in the financial crisis.

Mr McEwan said the deal "makes it easier for the Government to have a clean bank to sell".

He added: "This item hanging over a stock of our nature makes it more hard to sell".

But he stressed the decision on how and when to sell down the stake is "definitely in their (the Government's) hands".

They now have a GBX 290.00 TP on Royal Bank of Scotland Group The PLC (LON:RBS). Ongoing litigation meant the bank had been unable to pay dividends to shareholders and prevented increases in its share price.

The prospect of a large penalty had been hanging over the bank for years, making its shares hard to value. The DOJ settlement could clear the way for the government to offload its stake.

RBS said earlier this year that it earned £752 million ($1 billion) in 2017, its first profit after nine consecutive years of losses totaling £58 billion ($79 billion).

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