RBS share price: Bank ordered to face US lawsuit

on Mar 20, 2014
Updated: Apr 9, 2020

iNVEZZ.com, Thursday, March 20: Royal Bank of Scotland (LON:RBS) must face a US lawsuit seeking to force it to cover losses suffered by a bond insurer on a $1.15 billion (£695.66 million) securities offering backed by allegedly defective and fraudulent home loans, Reuters reported today.

The news agency cited a transcript of a Monday hearing, which showed that US District Judge John Koeltl in Manhattan had rejected RBS’s request to dismiss Assured Guaranty’s claims of fraud and aiding and abetting fraud.
The bond insurer sued RBS last year, alleging that it expected to pay $100 million in claims to investors in the securitisation, Soundview Home Loan Trust 2007-WMC1. Assured Guaranty claimed in its complaint that the loans, which were originated by WMC Mortgage Corp., failed to adhere to claimed lending standards. Investors lost money when many of the mortgages defaulted, causing the certificates to drop from AAA-rated to junk status, according to the insurer. Assured said it insured interest and principal payments on $291 million of the Soundview certificates.

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According to Koeltl, Assured Guaranty’s complaint is sufficient to raise “a strong inference that RBS had a specific motive and intent to deceive the plaintiff in order to obtain the policy for a specific transaction”.
Lawyers representing RBS and Assured Guaranty declined to comment when contacted by Reuters.
**RBS share price**

Shares in RBS – which is also being sued in New York in the latest fallout from the Libor rate-rigging scandal — have been trading higher so far today. As of 10:13 UTC, the stock stood at 303.44p, up 1.67 percent intraday.
RBS last month posted a full-year pre-tax operating loss of £8.2 billion, including regulatory and redress provisions of £3.844 billion, as well as impairments and other losses of £4.823 billion related to the formation of RBS Capital Resolution, the lender’s internal ‘bad bank’ unit (RBS share price down 5% as lender announces £8.24bn full-year loss). Since the release, the lender’s share price has tumbled more than 14 percent.

RBS had its ‘underperform’ rating and 265p price target reaffirmed by analysts at Deutsche Bank in a report issued yesterday. On Tuesday, RBC Capital, which also gives the stock an ‘underperform’ rating, cut its price objective on the shares from 310p to 250p.
According to AnalystRatingsNetwork data, 17 research analysts have a ‘sell’ rating on RBS, nine have it as a ‘hold’ and seven rate it as a ‘buy’. The consensus rating is ‘hold’ with an average price target of 320.88p.
**As of 10:04 UTC, buy RBS shares at 304.50p.**
**As of 10:04 UTC, sell RBS shares at 304.20p.**


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