RBS CEO sees diminishing chance of DOJ settlement this year
Royal Bank of Scotland Chief Executive Officer Ross McEwan said the likelihood is waning that the lender will settle a U.S. mortgage-bond probe before the end of the year as he'd hoped, though it's well-capitalized to handle a settlement.
"There are diminishing chances" the bank will settle with the U.S. Department of Justice in 2017, "but this is something that we do want to resolve," McEwan, 60, said in an interview with Bloomberg Television. "We are in a very strong capital position. I think there is a lot of distraction in the Department of Justice with other issues in the United States. I'm not too sure where we sit in the priority list."
Such a deal would eliminate the biggest remaining obstacle to RBS resuming dividends, which would make it easier for the government to find buyers for the majority stake it still holds 10 years after the financial crisis. McEwan said that when RBS does restore dividends, it will start "small" before potentially considering special payouts.
The U.K. plans to reduce its 71 percent stake by two-thirds over the next five years by selling 15 billion pounds of stock ($20 billion), according to a document released by the Treasury last month. It anticipates divesting 3 billion pounds of stock by the end of March 2019.
"The government is pleased with the progress we are making within the bank," McEwan said. "I think they will struggle to sell the stock before the settlement. No one knows how big the fine will be, or when it will come."
Since taking the helm four years ago, the New Zealander has eliminated thousands of jobs, shed tens of billions of pounds of assets, exited 22 countries and shrunk the investment bank. In a mark of progress, RBS posted its third consecutive quarterly profit in October, and last month closed its so-called bad bank housing its toxic loans.
The lender said this month that it would close 259 more branches, saying clients are moving online. At the end of last year, RBS had more than 1,400 locations.
"Behavior has changed dramatically," with 25 percent more customers using the bank's mobile app in the last 10 months, McEwan said.
McEwan praised the U.K.'s agreement to unlock divorce discussions with the European Union, announced earlier Friday, which opens the way for trade talks. British banks have been preparing for worst-case scenarios in case talks break down and they lose access to the EU market.
"This is really good news for all businesses," McEwan said. "If we get a longer transition and the rules established, I think that is really good news for us."