RBS to pay fine to settle mortgage probe in Q1

The Royal Bank of Scotland Group headquarters in London. The main lawsuit against RBS remains pending in the US District Court for the District of Connecticut relating to about $32bn of mortgage-backed securities.Bloomberg/LondonRoyal Bank of Scotland Group could pay a fine to settle claims of misconduct in its handling of US mortgage securities as early as this quarter, a person with knowledge of the matter said.The lender is bracing to settle Federal Housing Finance Agency accusations it sold faulty mortgage bonds to Fannie Mae and Freddie Mac from 2005 to 2007, said the person, who asked not to be identified because the talks are private. RBS could pay a fine of as much as $8bn, Chirantan Barua, an analyst at Sanford C Bernstein, wrote in a note today.Chief executive officer Ross McEwan, 57, has seen a series of fines, such as for rigging currency markets, undermine his plan to return the 80% taxpayer-owned lender to private ownership. RBS and Nomura Holdings are last to settle among 18 banks sued by the FHFA to recoup taxpayer costs after the US seized control of the mortgage-finance companies in 2008.“We expect a settlement in the next three to six months,” said Barua, who has an outperform rating on RBS. While the lender may pay as much as $8bn under a “worst-case” scenario, $5bn is more probable, he wrote.RBS shares fell 1.9% to 381.9 pence at 12:23pm in London trading, exceeding a 0.8% drop by the UK benchmark FTSE 100 Index. Shares of all of Britain’s major lenders declined.RBS in the fourth quarter of 2013 set aside £1.9bn ($2.9bn) for what it called “various claims and conduct related matters,” with the largest part earmarked for mortgage-backed securities litigation. The Edinburgh-based bank is scheduled to report full-year results on February 26.A spokesman at RBS in London declined to comment. Bank of America Corp last year reached a $9.5bn settlement resolving allegations it misrepresented loans packaged into bonds. HSBC Holdings, Europe’s largest bank by market value, was the most recent to close its involvement in the FHFA probe with a $550mn settlement in September.About $24bn has been paid to settle 16 cases brought by the FHFA against banks including JPMorgan Chase & Co and Deutsche Bank, according to the housing authority’s website.The main lawsuit against RBS remains pending in the US District Court for the District of Connecticut relating to about $32bn of mortgage-backed securities, RBS said in its last annual report. The bank agreed to pay $99.5mn in June to close a separate FHFA lawsuit against Ally Financial involving some securities underwritten by RBS.The timing for a settlement isn’t yet clear, said the person with knowledge of the matter.RBS was fined $634mn in November by US and UK authorities for rigging currency markets and $88mn in the same month by UK regulators for the 2012 collapse of its computer system that left millions of customers without access to their accounts for weeks.