RBS just dropped a horrendous market update - a £2.5 billion hit and a confirmed loss for 2015
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."
But investors were not happy in the market open with the revelations. The stock cratered within the first 15 minutes of trading, making the stock fall 30% on the year:
