Royal Bank of Scotland says it will take a surprise 2.5 billion pound ($3.58 billion) hit to its fourth-quarter profits after setting aside more cash to cover litigation costs, compensation for mis-selling loan insurance and an impairment charge at its private bank. Hayley Platt reports
It's an attempt to put its troubled past behind it - but it's a costly one. Royal Bank of Scotland is making a 3.6 billion pound provision to top up its pension fund and make amends for British and U.S. mis-selling. The UK government still owns three quarters of the bank after it needed bailing out during the financial crisis. The mass-problem fix is the latest stage of CEO Ross McEwan's turnaround plan. But World First's Jeremy Cook says the size of the provision was a surprise. (SOUNDBITE) (English) WORLD FIRST, CHIEF ECONOMIST, JEREMY COOK, SAYING: "I think a lot of investors and people looking at the RBS stock have got tired of just how much money this bank is having to put aside for litigation purposes, be it here in the UK, be it PPI, be it something related to the housing market over in the United States." RBS hasn't made a profit for seven years - and there's now not much chance of one this year. The provisions - which include a goodwill writedown at its private bank - will take a 2.5 billion pound chunk out of fourth quarter profit. Shares fell four percent - making the government's sell-off last August look good value. (SOUNDBITE) (English) WORLD FIRST, CHIEF ECONOMIST, JEREMY COOK, SAYING: "The fall in the share price that we've seen certainly since George Osborne sold off the stake at 330 pence and it's now down to around 250 pence." Santander has also taken a mis-selling hit in Britain. Fourth quarter net profit slumped 98 percent - a slowing economy in Brazil adding to the challenges. But the euro zone's largest lender did at least meet capital ratio targets which have been under scrutiny for some time.