Royal Bank of Scotland has agreed multimillion-pound payouts to settle claims from shareholders that they were misled during the bank’s £12bn cash call in 2008.
The bailed-out bank has reached agreement with three out of five groups which brought the claims, worth about £4bn, over the rights issue which took place before its £45bn taxpayer bailout.
The groups represent 77% of the claims by value and the bank said it would aim to reach a deal with the remaining two. In total, it has set aside £800m to settle the claims.
Ross McEwan, the chief executive of RBS, has been trying to tackle these so-called legacy issues. The bank also faces a penalty of up to £8bn from the US authorities over the way it sold mortgage bonds a decade ago.
The bank, which is not admitting liability, last week failed its annual health check from the Bank of England. Uncertainty about such matters is one reason the bank struggled in last week’s stress tests.
“We have been very clear that we wanted to deal with as many of our legacy litigation issues as possible during 2015 and 2016. We are pleased to have reached this agreement and hope that it will be accepted by the remaining claimant groups so that this long course of complex and costly litigation can now be concluded,” said McEwan.
A trial date has been set for March 2017. One group which represents 27,000 shareholders is suing Fred Goodwin, who was chief executive of RBS at the time of its taxpayer bailout, and three of the bank’s former executives. The group said: “We were only informed of this settlement at the end of last week. At the moment we are considering the issues and the implications.”
In August, RBS set aside £700m for the case after an attempt at mediation in July failed. It said the £800m would be covered from its existing provisions.
The bank is 73% owned by taxpayers and the UK chancellor, Philip Hammond, has admitted that any attempts to reduce the stake is not possible because of the litigation problems and issues over selling off 300 branches.
Clive Zietman, partner and head of commercial litigation at Stewarts Law, said: “The case brought by our clients against RBS arising from the April 2008 rights issue has settled.
“RBS will pay up to £800m to the various shareholder groups. The litigation, in which we act for more than 300 institutional investors, was due to go to a six-month trial starting in March 2017. We are unable to comment further at this stage.”