McEwan wants to deal with past issues

RBS takes further hit over legal bills and mis-selling

Ross McEwanRoyal Bank of Scotland has unveiled a series of payments into its pension fund and legal settlements in order to quicken the repair of its balance sheet.

Chief executive Ross McEwan admitted that these extra charges will impact on the bottom line.

It is putting £4.2 billion into its pension fund to plug an accounting deficit and has set aside an extra £2.5bn to cover legal bills, compensation payouts and reduced income due to low interest rates.

RBS has also found an extra £1.5bn to cover its legal bill for selling toxic mortgage-backed bonds, taking the total provisions to £3.8bn.

A further £500m will cover mis-sold payment protection insurance taking the total amount for this to £4.3bn.

There is a £498m goodwill writedown in its private bank.

Mr McEwan said in an unscheduled trading update just weeks before the annual results are announced: “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.

“We’ve always been open about the scale of past issues facing RBS and although there is clearly much more to do, this announcement is a further step towards addressing legacy issues and building a great bank for our customers and delivering long term value for our shareholders.”

The bank’s plans to clean up its core businesses failed to impress investors who baulked at the costs and marked the shares 1.5% lower in early trading.

AJ Bell investment director Russ Mould, said:The taxpayer-backed bank is setting aside another £500m to pay for PPI and £1.5bn for bad housing debts in the US which means it will make yet another loss.

“It’s another bitter pill but putting legacy issues behind it is essential if Chancellor George Osborne is going to off-load the government’s stake during this parliament.”

Fionn Travers-Smith, campaign manager for Move Your Money, said: “These latest losses for the taxpayer show that it is time for a dramatic rethink on what to do with RBS bank.

“Today’s announcement is the latest demonstration that the public will never get our bail-out money back through mis-guided, reckless and loss-making share sales. 82% of the public want RBS to work in the interests of society, instead we’re getting more broken promises and bank rewards for failure.

“Instead of watching aghast as the share price tumbles further down the bargain basement, the Government should use our investment in RBS to reshape the bank into one that serves businesses and communities. Anything less would be a travesty for our economy and a failure of governance for our society.”

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