RBS share price falls as broker warns of additional misconduct charges

on Feb 16, 2015
Updated: Oct 21, 2019

Royal Bank of Scotland (LON:RBS) may have to set aside £10.1 billion in additional conduct costs, following probes into currency market rigging and US mortgage-backed securities, according to broker Keefe Bruyette & Woods (KBW). Analysts Mark Phin and Richard Smith wrote in a note to clients today: “RBS looks one of the most exposed European banks to litigation and conduct risk. It will take time to gain comfort over the ultimate costs.”

According to their estimates, Britain’s largest state-owned lender may take £2.6 billion of charges to settle foreign-exchange and other regulatory investigations in benchmark rigging. Shareholder lawsuits over a 2008 fundraising just before RBS was bailed out could cost an additional £4.4 billion. The £10.1 billion estimate also includes a £1.8 billion provision to settle claims of misconduct in the bank’s handling of US mortgage securities. RBS may also have to provide £1.1 billion to compensate customers who were sold payment protection insurance, or loan coverage, they did not want or need.

RBS, which reports full-year results on February 26, has not commented on the broker’s note. Shares in the Edinburgh-based group have been trading lower today and as of 15:07 GMT they were changing hands at 384.00p — 1.27 percent down intraday.
RBS’ share price was also hit by a new downgrade on the stock. Ian Gordon at Investec today moved his recommendation from ‘hold’ to ‘sell’, forecasting a fourth quarter loss for the bank.
According to the Financial Times, the 25 analysts projecting 12 month price targets for the FTSE 100-listed lender, have a median target of 385.00p, with a high estimate of 530.00p and a low of 250.00p. As of 14 February 2015, the consensus forecast amongst 51 polled investment analysts covering RBS has it that investors should hold their position in the company.
As of 15:48 GMT, Monday, 16 February, Royal Bank of Scotland Group share price is 384.15p.

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