On Friday, state-backed Royal Bank of Scotland (RBS) reported its ninth straight annual loss since its £45.5bn bailout in 2008.
The £7bn net loss, compared with a £2bn loss in 2015, has sent RBS’ shares tumbling 4.5% to 238.2p; a further blow for the UK taxpayer, who have a 73% holding in the troubled Bank.
The jump in losses are reported to be mainly driven by what the Bank call “one-off” costs amounting to around £10bn last year. Of this £10bn, mis-selling and conduct related costs attributed around £5.6bn, up from the £3.6bn reported for the previous year.
RBS Chief executive, Ross McEwan described the looming fines and legal costs as penalties for “sins of the past”.
A large part of the mis-selling related costs are associated to the forthcoming penalty from the United States Department of Justice (DoJ) over the way the Bank packaged and sold residential mortgage back securities (RMBS) in the run up to the financial crisis.
A further significant proportion of the remainder of the mis-selling and conduct related costs may have been used to provide redress to businesses wrongly entered into their Global Restructuring Group (GRG). The GRG was RBS’s “turnaround division” where businesses were informed that, once in GRG, their banking arrangements would be dealt with by a difference division within the Bank.
Unfortunately, GRG was used to secure as much as possible in fees for the Bank through conduct that was not in the best interest of the borrowers. For more information regarding GRG, please click here.
Mr McEwan said the lender will remain in the red this year, meaning it will have been loss-making for a decade, but that he aimed to return the Bank to profit in 2018. However, with ongoing negotiations with DoJ and the increasing number of GRG claims being brought, the Banks profit turning potential is yet to be seen.
Seneca Banking Consultants have experience in dealing with claims against the Bank. We have previously recovered £2.75 million relating to GRG losses and have also recovered just under £100 million in total compensation for clients.
If you or your business has been affected by the conduct of RBS, and believe you may have a claim in respect of this, please get in touch.