27th Jan 2016 07:24
LONDON (Alliance News) - The Royal Bank of Scotland Group PLC on Wednesday outlined a series of additional provisions and impairments it will book in the fourth quarter which will impact its 2015 results by just over GBP4 billion, related to its pension obligations, US residential mortgage-backed securities, payment protection insurance, and on its private banking arm.
The FTSE 100-listed, majority taxpayer-owned bank said an accounting change related to the recoverability of a surplus in an employee pension fund will mean the group will recognise GBP4.2 billion in already-committed future contributions to its pension scheme for past service in its 2015 accounts.
As a result of this, it expects an accounting deficit of GBP3.3 billion for the year to the end of December, with the net, post-tax impact of the change on its tangible net asset value to be around GBP1.6 billion. RBS said the change will also reduce its Common Equity Tier 1 capital ratio by around 0.7%.
RBS also will make a GBP4.2 billion payment into its main pension scheme, after signing a memorandum of understanding with the main scheme trustee. This will result in a further 0.3% hit to its CET1 ratio.
Elsewhere, RBS will take an additional GBP2.2 billion provision on its exposure to US residential mortgage-backed securities litigation claims, which will cut its fourth quarter profit by GBP1.5 billion and its CET1 ratio by 0.6%.
It will book another GBP500.0 million provision for payment protection insurance compensation in the UK, which will again cut the CET1 ratio by 0.2%, and will book a GBP498.0 million goodwill impairment charge related to its private banking business, which will take a chunk of the same size out of its fourth quarter profit but will not impact its CET1 ratio.
As of the end of December, RBS expects it will show a CET1 ratio of around 15.0% as a result of the charges and provisions, compared to 16.2% at the end of September.
By Sam Unsted; [email protected]; @SamUAtAlliance
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