ROYAL Bank of Scotland has agreed an £800 million payout to settle claims from some of its shareholders who claimed they were misled during its £12 billion cash raising exercise in 2008.
The taxpayer-owned bank said it had reach a “full and final settlement” with three of the five groups that brought claims worth £4bn over the rights issue, which came just before its £45bn UK Government bail-out. The three groups are said to represent 77 per cent of the total claims, which RBS has set aside £800 million to settle.
Investors had argued they were misled over the financial health of RBS which, at the time, was led by Fred “The Shred” Goodwin, and had bought shares just months before the bail-out. The bank has not admitted liability for what chief executive Ross McEwan describes as “legacy issues”.
He said: “We have been very clear we wanted to deal with as many of our legacy litigation issues as possible during 2015 and 2016. We are pleased to have reached this agreement and hope it will be accepted by the remaining claimant groups so this long course of complex and costly litigation can now be concluded.”
In a statement, RBS said: “RBS will now seek to agree finalised terms with members of the remaining two groups whose claims are presently continuing. Any claims for which settlement is not achieved will, however, continue to be vigorously defended.”
Clive Zietman, from Stewarts Law said: “RBS will pay up to £800m to the various shareholder groups. The litigation, in which we act for more than 300 institutional investors, was due to go to a six-month trial starting in March 2017.”
However, one group has told the bank its £1.25bn legal action will continue.
The RBoS Shareholder Action Group, which represents 27,000 shareholders, is suing Mr Goodwin and three of the bank’s former executives. It said: “We look forward to seeing Fred Goodwin and RBS in court in March.”
The group, which said it was the only one suing Mr Goodwin, mounted the action “on behalf of thousands of investors, both private and institutional, who lost money by subscribing for shares during the 2008 RBS rights issue”.
The news came ahead of RBS’s third-quarter results, which will be scrutinised for any further provisions relating to the case. It is also facing a penalty of up to £8bn from US regulators over the mis-selling of mortgage securities a decade ago. The bank has continued to struggle since its bail-out, reporting a loss of £1.98bn for 2015, its eighth consecutive year of losses.
Last week RBS failed its annual health check from the Bank of England, and uncertainty about the results of litigation was given as one of the reasons for that. The bank is bolstering its balance sheet by £2bn by cutting costs.
Chancellor Philip Hammond has admitted any attempt to reduce the Government’s stake in RBS is not possible because of the litigation problems.
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