The Royal Bank of Scotland Group plc (together with its subsidiaries, “RBS”) today announces that it has reached a civil settlement in principle with the US Department of Justice (“DoJ”) to resolve its investigation into RBS’s issuance and underwriting of US residential mortgage-backed securities (“RMBS”) between 2005 and 2007.
Under the terms of the proposed settlement, RBS has, in principle, agreed to pay a civil monetary cash penalty of US $4.9 billion (c. £3.6bn at the current exchange rate). Of this amount, US$3.46 billion will be covered by existing provisions with an incremental charge of US$ 1.44 billion in Q2 2018. The pro forma impact on RBS’s 31 March 2018 Common Equity Tier 1 ratio (“CET1”) is a reduction of approximately 50 basis points and a reduction of 9p on 31 March 2018 fully diluted TNAV per share. Adjusting for the combined impact of both the RMBS settlement and the pension deficit contribution of £2 billion announced on 17 April, the Q1 2018 pro forma CET1 is 15.1% and fully diluted TNAV is 274p.
Commenting on the developments, RBS CEO Ross McEwan said:
“Today’s announcement is a milestone moment for the bank. Reaching this settlement in principle with the US Department of Justice will, when finalised, allow us to deal with this significant remaining legacy issue and is the price we have to pay for the global ambitions pursued by this bank before the crisis. Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer.”
The proposed settlement is subject to the DOJ and RBS entering into a legally-binding agreement, and there can be no assurance that the parties will agree on the final terms of any proposed settlement.
The incremental charges will be booked in NatWest Markets plc (“NWM”) on a consolidated basis. RBS retains its guidance on a NWM consolidated end state (post ring-fencing transfers) CET1 target of 14%, as per the outlook statement on p17 of RBS’s 2017 Annual Report and Accounts (“FY2017 AR&A”).
Separately, as at 31 March 2018, RBS held provisions of US$0.8 billion for other legacy RMBS matters. Please see RBS’s FY2017 AR&A for further information.
MAR - Inside Information
This announcement Includes Inside information which is a disclosure required by the European Union Market Abuse Regulation EU 596/2014 of 16 April 2014. "Inside Information" is used as defined in that Regulation.
