Ulster Bank parent, Royal Bank of Scotland has set aside another $3.8 billion ahead of an expected fine from US authorities.
The taxpayer-backed lender said the provision takes its total to $8.3 billion to cover a potential settlement over its alleged role in the mis-selling of toxic mortgage-backed securities before the financial crisis.
Shares rose 5 per cent as investors hoped the move signalled a settlement with the US Department of Justice may be lower than feared.
But RBS warned that further “substantial” provisions may still be needed and said it remained uncertain when or if a deal would be reached.
The mammoth provisions, which will be included in the bank’s results for the fourth quarter of 2016, will push RBS deeper into the red when it posts full-year figures next month.
It is likely to see the group – which is 72 per cent owned by taxpayers – post one of its largest losses since its UK government bailout at the height of the financial crisis.
RBS chief executive Ross McEwan said the bank had suffered from “misplaced ambition” in the past. He added that the provisions are “another painful example of the cost of that legacy”.
The provisions come after Deutsche Bank and Credit Suisse agreed to settle similar US claims last year, paying a combined $12.5 billion. But Barclays refused to agree a settlement and the DoJ is now taking legal action against the British bank.
The settlement with US authorities is one of the key hurdles RBS must clear before the Government can look to sell it back fully into private hands. – PA