RBS surprises with pre-close trading update

27th Jan 2014 16:39

- Lender announces 2.9bn pounds in additional provisions for claims- Unchanged quarterly forecast for impairments and valuation adjustments - Medium-term capital targets unchangedRoyal Bank of Scotland (RBS) has decided to provide 2.87bn pounds to cover various claims and conduct related matters affecting the group.That followed reports over the weekend that Bank of England Governor Mark Carney sees putting these issues behind them as lenders' most urgent task. The lion's share of those new provisions - £1.9bn - were meant to address claims linked primarily to mortgage-backed securities and securities related litigation in the wake of recent third party litigation settlements and regulatory decisions.The remainder was almost evenly split between provisions for Payment Protection Insurance redress and related costs (£465m) and a further £500m provision for interest rate hedging products redress and administration costs.In terms of operating items the lender continues to see impairments and asset valuation adjustments rising, in total, to between £4.0 and £4.5bn for the fourth quarter, as previously announced in November 2013. Non-core asset reduction was accelerated during the final quarter of last year. Hence, third-party assets as of December 31st were left standing below previous guidance of £35bn. The cost of the above will be reflected in that division's quarterly loss for the period. Core operating losses for the three months to December will further include approximately £200m of additional provisions for various conduct related and legal expenses.The performance of the Markets segment during the quarter followed normal seasonal trends.RBS continues to target a fully-loaded Core Tier 1 capital ratio of around 11% by the end of 2015 and 12 or above by the end of the following year, as per the capital plan which was set out alongside its third quarter results. The bank will release its full-year audited results on February 27th. "(...) problems still just emerging"Commenting on the results RBS's Chief Executive Officer (CEO), Ross McEwan, highlighted the complexity of cleaning up for bad decisions taken - in the run up to the financial crisis - in the multiple countries and businesses in which RBS was then operating. That means that some problems are still just emerging. In his opinion "the good news is we are now a much stronger bank and can manage these costs while still supporting our customers."RBS also confirmed to shareholders on Monday afternoon that the Executive Committee will not receive bonuses for their performance last year. Shares of RBS closed the session 2.21% lower, at 332.2p. AB