Under the terms of the proposed settlement, RBS has, in principle, agreed to pay a civil monetary cash penalty of US $4.9 billion (c. £3.6bn at the current exchange rate). Of this amount, US$3.46 billion will be covered by existing provisions with an incremental charge of US$ 1.44 billion in Q2 2018. The pro forma impact on RBS’s 31 March 2018 Common Equity Tier 1 ratio (“CET1”) is a reduction of approximately 50 basis points and a reduction of 9p on 31 March 2018 fully diluted TNAV per share. Adjusting for the combined impact of both the RMBS settlement and the pension deficit contribution of £2 billion announced on 17 April, the Q1 2018 pro forma CET1 is 15.1% and fully diluted TNAV is 274p.
Commenting on the developments, RBS CEO Ross McEwan said:
“Today’s announcement is a milestone moment for the bank. Reaching this settlement in principle with the US Department of Justice will, when finalised, allow us to deal with this significant remaining legacy issue and is the price we have to pay for the global ambitions pursued by this bank before the crisis. Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer.”
The proposed settlement is subject to the DOJ and RBS entering into a legally-binding agreement, and there can be no assurance that the parties will agree on the final terms of any proposed settlement.
The incremental charges will be booked in NatWest Markets plc (“NWM”) on a consolidated basis. RBS retains its guidance on a NWM consolidated end state (post ring-fencing transfers) CET1 target of 14%, as per the outlook statement on p17 of RBS’s 2017 Annual Report and Accounts (“FY2017 AR&A”).
Separately, as at 31 March 2018, RBS held provisions of US$0.8 billion for other legacy RMBS matters. Please see RBS’s FY2017 AR&A for further information.
MAR - Inside Information
This announcement Includes Inside information which is a disclosure required by the European Union Market Abuse Regulation EU 596/2014 of 16 April 2014. "Inside Information" is used as defined in that Regulation.
Forward Looking Statements
This announcement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to RBS and its subsidiaries' regulatory capital position, risk-weighted assets, impairment losses and credit exposures under certain specified scenarios. In addition, forward-looking statements may include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. These statements concern or may affect future matters, such as RBS's future economic results, business and capital plans and current strategies. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, legislative, fiscal and regulatory developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or RBS's actual results are discussed in RBS's UK annual report and accounts and interim reports and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBS's Reports on Form 6-K and most recent Annual Report on Form 20-F. The forward-looking statements contained in this announcement speak only as of the date of this announcement and RBS does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.