27th Jan 2014 17:00
LONDON (Alliance News) - Royal Bank of Scotland Group PLC said Monday it will make a further GBP3.07 billion in provisions against litigation and customer claims in its full-year results for 2013, which it will announce on February 27.
Of that total, RBS said it will make a provision of GBP1.9 billion to cover claims primarily related to mortgage-back securities, following recent third-party claims and regulatory decisions.
An additional GBP465 million provision will be made for Payment Protection Insurance redress, RBS said. It said that in the fourth quarter PPI claims continued at previous rates of about GBP225 million per quarter, rather than declining as expected. RBS said said PPI claims now are expected to continue for a longer period.
RBS said its cumulative provision for PPI is GBP3.1 billion, of which GBP2.2 billion had been utilised as of December 31, 2013. The remaining provision of GBP0.9 billion covers approximately twelve months of redress and administrative expenses, it said.
Another GBP500 million of the total provisions announced Monday is for interest-rate hedging products redress and administration costs, raising RBS's total provision for these product claims to GBP1.25 billion at December 31. The bank said the increased provision reflects higher volumes of claims and anticipated redress payments.
The final GBP200 million is for "various conduct-related and legal expenses", RBS said, and will be charged against core operating expenses in the fourth quarter.
RBS created RBS Capital Resolution on January 1 as a "bad bank". It said that impairments and asset valuation adjustments are expected to be GBP4.0 billion to GBP4.5 billion in aggregate, as announced on November 1.
RBS said its non-core asset reduction programme was accelerated in the fourth quarter of 2013, resulting in third-party assets on December 31 being below previous guidance of GBP35 billion. It said this faster process will be reflected in the division's operating loss for the quarter.
RBS added that Core Tier 1 asset ratio was around 11% on December 31, while on a fully loaded Basel III basis, its equivalent Core Tier 1 ratio is expected be between 8.1% and 8.5%.
RBS said its Markets division's performance in the fourth quarter of 2013 "reflected normal seasonal trends".
RBS shares closed down 2.2% at 332.20 pence per share Monday.
By Tom Waite; [email protected]; @thomaslwaite
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