The Royal Bank of Scotland just dropped a horrendous market update which included billions of pounds worth of writedowns, provisions for civil lawsuits and compensation for victims of mis-selling.
These are the most important points from the lengthy statement and from a conference call this morning:
- An extra £1.5 billion in provisions to the mis-selling of mortgage backed securities in the US. This brings the total amount to £3.8 billion. “These are purely related to civil litigation and does not include anything from the US Department of Justice or the US attorney,” said RBS CEO Ross McEwan said on a conference call this morning.
- RBS CFO Ewan Stevenson added “I wouldn’t read anything into this statement that we are close to settling with US authorities.”
- An extra £500 million to pay for the mis-selling of payment protection insurance. This brings RBS’ total PPI provisions pot to £4.3 billion. PPI was misleadingly sold alongside loans, credit cards and mortgages, and banks have been forced to pay back customers who were wrongly persuaded to take the coverage. A huge portion of consumers who had PPI never knew they were paying for it, and payouts based on PPI claims were statistically lower than expected.
- A £498 million writedown from its private bank Coutts.
- A major change to its pensions policy — as Ewan Stevenson, CFO at RBS said on an conference call this morning, “there’s nothing simple when it comes to pensions,” after a journalist asked to put the changes in “layman’s terms.” Effectively, RBS is making a £4.2 billion payment into its pension scheme due to changes in its accounting policy.
“I am determined to put the issues of the past behind us, and make sure RBS is a stronger, safer bank,” said McEwan on the call. “We now have the financial strength to deal with this.”
“We said 2015 and 2016 would tidying up these legacy issues.”