Royal Bank of Scotland (LON:RBS) and peers Wells Fargo and Deutsche Bank have agreed to pay $165 million in relation to their underwriting for the now-bankrupt subprime lender NovaStar Mortgage, Reuters has reported. The settlement comes as the FTSE 100 lender, bailed out by the UK government during the financial crisis, continues to deal with the consequences of its turbulent past.
RBS’ share price has advanced in London in today’s session, having added 0.89 percent to 237.30p as of 13:26 GMT. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.15 percent higher at 7,368.74 points. The group’s shares have gained a little over one percent over the past year, and are up by some five percent in the year-to-date.
Reuters reported today that RBS, Deutsche Bank and Wells Fargo had reached a $165-million class-action settlement of investor claims over their underwriting for the now-bankrupt subprime lender NovaStar Mortgage. The settlement, which requires approval by US District Judge Deborah Batts in Manhattan, resolves claims that offering materials prepared by the banks misled investors into believing that loans, underlying the roughly $7.55 billion of NovaStar mortgage-backed securities they bought, were properly underwritten, and were safe.
The news comes as RBS, rescued by the UK taxpayer with a £45-billion bailout, continues to face a number of legal challenges, including a settlement with US authorities for mis-sold mortgage-backed securities in the run-up to the financial crisis. Earlier this year, the FTSE 100 group booked a £3.1-billion charge for the upcoming settlement.
The 20 analysts offering 12-month price targets for RBS for the Financial Times have a median target of 225.00p on the shares, with a high estimate of 280.00p and a low estimate of 160.00p. As of March 11, the consensus forecast amongst 24 polled investment analysts covering the blue-chip lender has it that the company will underperform the market.