By Richard Partington
(Bloomberg) – Royal Bank of Scotland (RBS) Group Plc, Britain’s largest taxpayer-owned lender, could pay as much as $4.5 billion to resolve claims of misconduct in its handling of US mortgage securities, according to Bloomberg Intelligence.
RBS may be closer to JPMorgan Chase & Co.’s $4 billion accord with the US Federal Housing Finance Agency (FHFA) over its sale of mortgage-backed securities than Deutsche Bank AG’s $1.9 billion deal, according to an analyst for Bloomberg Intelligence.
The FHFA, suing on behalf of government-owned lenders Fannie Mae and Freddie Mac, is seeking to add to more than the $19-billion it has already collected in settlements from 16 other banks.
Edinburgh-based RBS has set aside about 2.1 billion pounds ($3.2 billion) to cover the cost of the lawsuit.
The stock gained 0.6 percent to 347.1 pence in London, below the 407 pence the UK government says it would break-even on its 45.5 billion-pound bailout during the crisis.
RBS is seeking to have the case dismissed, arguing the suit by the FHFA filed in 2011 came too late.
The legal action relates to $32 billion in residential mortgage-backed securities sold to Fannie and Freddie from 2005 to 2007.
Any settlement “is likely to be substantial” Chief Executive Officer Ross McEwan said on a call with analysts in discussing the bank’s first-quarter earnings on April 30. A deal could come this year, but “may spill into 2016” he said. A spokeswoman for RBS didn’t respond to a request for comment Wednesday.
RBS and Nomura Holdings Inc lost a trial in a separate FHFA case this month in which the British lender must pay $528 million and the Japanese bank $170 million. An extra $108 million could be paid by either bank or split between them; the banks sought to postpone their payments while they appeal the judgment, Bloomberg Intelligence said.
