RBS agrees to $4.9bn 'milestone' settlement with US

Royal Bank of Scotland chief executive Ross McEwan

The Royal Bank of Scotland has apparently reached a tentative deal of Dollars 4.9 billion to resolve the United States probe into the sale and structuring of its mortgage backed securities.

RBS said that $3.46bn of the proposed civil settlement would be covered by existing provisions and that the bank would take a $1.44bn charge in the second quarter to cover the rest.

RBS previously agreed in July 2017 to pay US$5.5bn to resolve a lawsuit by the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac, claiming it misled the USA mortgage giants into buying mortgage-backed securities.

McEwan had hoped for a settlement before the end of 2017, but changes at the DOJ following the inauguration of U.S. President Donald Trump saw negotiations slip back.

RBS's share price jumped around 5% in morning trading, following the news.

The settlement could pave the way for the British government to begin selling its stake in RBS again, which now amounts to 71 per cent of the business.

The British government insisted that the USA claims had to be resolved before it could sell its 72 percent stake in RBS. The taxpayer-backed lender has agreed a settlement with the US DoJ over claims it mis-sold mortgage bonds.

The proposed settlement is subject to the Department of Justice 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, RBS said.

He added: "This item hanging over a stock of our nature makes it more hard to sell".

"This will help the government to sell a cleaner bank", McEwan said.

"Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognizing that fair value could well be below what the previous government paid for them", UK Treasury chief Philip Hammond said in April.

Royal Bank of Scotland Group The PLC (LON:RBS) just had their share rating of a "Hold" issued by research analysts at Shore Capital, who now has a GBX 290.00 target on the 34.10B GBP market cap company or a -0.62 % downside potential. That would allow funds that only invest in dividend-paying stocks to invest.

RBS reported its first annual profit in a decade in February, making a profit of £752m in 2017, following a £7bn loss in 2016.

Stein, the Bloomberg Intelligence analyst, said that "RBS's billions in payments to other agencies and states no doubt played a role in its less-than-expected DoJ settlement".

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