London — Royal Bank of Scotland’s (RBS) chances of
reaching a deal this year with the US department of justice (DoJ) over
its mis-selling of toxic mortgage-backed securities are "diminishing",
its CEO Ross McEwan said in a Bloomberg TV interview.
McEwan had said several times this year he expected to reach a settlement in 2017, a key step in allowing the bank to return to full-year profit in 2018. Analysts have estimated the bank could pay up to $12bn to settle the case.
"There are diminishing chances we settle in the year," McEwan said in the interview. RBS had no further comment.
McEwan has been trying to clean up RBS’s balance sheet and end an array of legal cases so the UK government can sell the more-than 70% stake in the bank it obtained via a £46bn ($60bn) bailout during the financial crisis.
The case with the DoJ is the last major such problem remaining, after RBS paid the US Federal Housing Finance Agency $5.5bn to settle similar claims in July.
RBS has not made an annual profit since 2007. It has forecast it will in 2018, contingent on settling with the DoJ.
If the deal is delayed into 2018, as is now likely, it could jeopardise the bank’s plan to return to profit at a time when Britain’s government is preparing to off-load its stake in RBS.
Jefferies analyst Joe Dickerson said he expected the bank will need to make an additional provision $2.5bn to cover the settlement. If shifted into 2018, it would wipe out much of the £3.2bn of profit the bank is forecast to make. However, he added that if the bank got some certainty on the figure it could still make the provision before its full-year results on February 23. The bank already has $3.1bn set aside.
Talks with the DoJ initially stalled due to staffing changes in the US government following the election of President Donald Trump.
McEwan said there had been no substantial discussions with the DoJ when reporting the bank’s third-quarter results in October, but that he remained hopeful of settling this year and that some preliminary conversations had taken place.
This had seemed optimistic to some. Dickerson said most market participants had been expecting a settlement some time between now and the end of the first half of 2018. "It would be positive if this deal could be settled within that time frame from the standpoint of returning capital to shareholders," he said.
RBS shares were up 1.5% by 10.52am GMT, against a broader 2.8% climb in the STOXX European banks index.
Reuters
McEwan had said several times this year he expected to reach a settlement in 2017, a key step in allowing the bank to return to full-year profit in 2018. Analysts have estimated the bank could pay up to $12bn to settle the case.
"There are diminishing chances we settle in the year," McEwan said in the interview. RBS had no further comment.
McEwan has been trying to clean up RBS’s balance sheet and end an array of legal cases so the UK government can sell the more-than 70% stake in the bank it obtained via a £46bn ($60bn) bailout during the financial crisis.
The case with the DoJ is the last major such problem remaining, after RBS paid the US Federal Housing Finance Agency $5.5bn to settle similar claims in July.
RBS has not made an annual profit since 2007. It has forecast it will in 2018, contingent on settling with the DoJ.
If the deal is delayed into 2018, as is now likely, it could jeopardise the bank’s plan to return to profit at a time when Britain’s government is preparing to off-load its stake in RBS.
Jefferies analyst Joe Dickerson said he expected the bank will need to make an additional provision $2.5bn to cover the settlement. If shifted into 2018, it would wipe out much of the £3.2bn of profit the bank is forecast to make. However, he added that if the bank got some certainty on the figure it could still make the provision before its full-year results on February 23. The bank already has $3.1bn set aside.
Talks with the DoJ initially stalled due to staffing changes in the US government following the election of President Donald Trump.
McEwan said there had been no substantial discussions with the DoJ when reporting the bank’s third-quarter results in October, but that he remained hopeful of settling this year and that some preliminary conversations had taken place.
This had seemed optimistic to some. Dickerson said most market participants had been expecting a settlement some time between now and the end of the first half of 2018. "It would be positive if this deal could be settled within that time frame from the standpoint of returning capital to shareholders," he said.
RBS shares were up 1.5% by 10.52am GMT, against a broader 2.8% climb in the STOXX European banks index.
Reuters
No comments:
Post a Comment