RBS shares rise as bank earmarks further £3.1bn for US toxic mortgages fine
Royal Bank of Scotland has set aside another 3.8 billion US dollars (£3.1 billion) ahead of an expected fine from US authorities.
The taxpayer-backed lender said the provision takes its total to 8.3 billion US dollars (£6.7 billion) to cover a potential settlement over its alleged role in the mis-selling of toxic mortgage-backed securities before the financial crisis.
Shares rose 5% as investors hoped the move signalled a settlement with the US Department of Justice (DoJ) may be lower than feared.
But RBS warned that further "substantial" provisions may still be needed and said it remained uncertain when or if a deal would be reached.
The mammoth provisions, which will be included in the bank's results for the fourth quarter of 2016, will push RBS deeper into the red when it posts full-year figures next month.
It is likely to see the group - which is 72% owned by taxpayers - post one of its largest losses since its government bailout at the height of the financial crisis.
RBS had already sunk into the red by £2.5 billion for the first nine months of 2016 and the provision will see full-year losses widen substantially.
The group has posted losses of more than £50 billion over the past eight years.
RBS chief executive Ross McEwan said the bank had suffered from "misplaced ambition" in the past.
"It's clear to me that RBS became detached from the consumer-focused values that has to be at the heart of any bank," he said.
He added that the provisions are "another painful example of the cost of that legacy".
"Once these issues are behind us, we can focus 100% of our efforts on our core bank and serving our customers better," he said.
The provisions come after German investment banking giant Deutsche Bank and Swiss group Credit Suisse agreed to settle similar claims with the DoJ late last year, paying a combined 12.5 billion US dollars (£9.9 billion).
But Barclays refused to agree a settlement and the DoJ is now taking legal action against the British bank.
The settlement with US authorities is one of the key hurdles RBS must clear before the Government can look to sell it back fully into private hands.
Its share price has been weighed on heavily over the past year amid fears over the size of the fine.
But bosses at the group cast doubt over the timing and size of the ultimate settlement, confirming only that they continue to co-operate with the DoJ, but are not currently in active talks.
The bank said: "The duration and outcome of these investigations and other RMBS (mortgage-backed security) litigation matters remain uncertain, including in respect of whether settlements for all or any of such matters may be reached."
RBS has endured a difficult past year, having failed Bank of England stress tests late in 2016, while also facing more controversy over its treatment of struggling businesses and seeing Santander ditch talks to buy its Williams & Glyn branches for a second time.