Paying for the sins of the past – Royal Bank of Scotland is setting aside more billions to cover legal costs, compensation for mis-selling of loan insurance and an impairment charge at its private banking division.
Point of view
I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank
RBS will also pay a large sum towards the deficit in its pension fund for retired staff.
The total provision is 3.6 billion pounds (4.73 billion euros).
Chief Executive Ross McEwan said: “I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank. We will now continue to move further and faster in 2016 to clean-up the bank and improve our core businesses.”
The clean-up move means there will be no profit for the year at RBS.
It has not made a profit for seven years and is 73 percent owned by the British government after having to be bailed out with taxpayers’ money because of bad decisions made in the run up to the 2008 financial crisis.
British finance minister George Osborne was criticised for selling some of the RBS shares the government owns for 330 pence each, but with the price now down to just over 250 pence that looks like a shrewd move.
Shareholders and analysts have bemoaned the rising costs of cleaning up historical problems and continued uncertainty about what RBS will need to pay to settle US investigations into claims it misled investors in mortgage-backed securities during the sub-prime scandal.
RBS’s shares finished down 1.99 percent on Wednesday.