RBS half-year figures to reveal huge hit for computer system meltdown

By ERIKKA ASKELAND
Published on 30/07/2012 00:00

Royal Bank of Scotland (RBS) is expected to unveil a further £100 million provision for payment protection insurance (PPI) mis-selling and an additional £100m hit to cover the cost of its June IT meltdown when it announces its half-year results on Friday.

The taxpayer-backed bank is also facing fines over allegations it was involved in Libor rigging, and further pressure from companies that claim to have been mis-sold complex interest rate swaps on loans.

RBS chief executive Stephen Hester is expected to reveal half-year losses reaching anywhere between £1.2 billion and £1.5bn in what has been a torrid reporting season for banks.

The bank has reportedly paid more than €30m (£25m) to a Dublin-based businessman who fought RBS in court over claims it had mis-sold him an €87m interest rate hedging product linked to a €47m loan.

Last week, Barclays used its half-year results to announce a £450m provision against swap mis-selling compensation costs. Sources have suggested RBS could be on the hook for a larger number of claims that could cost upwards of £1bn.

The Financial Services Authority (FSA) established a compensation scheme after it estimated that at least 28,000 small and medium-sized firms were sold interest rate swaps since 2001. Barclays, HSBC, Lloyds Banking Group and RBS have all agreed to compensate customers after the FSA found “serious failings” in the sale of the complex financial products.

At the weekend, a pressure group called Bully-Banks confirmed its membership has swollen to more than 1,200 individuals who together own some 600 SMEs, each of which claims to have been mis-sold an interest rate swap arrangements (IRSA) in excess of £300m. RBS has signalled it will not give in to shareholder pressure to estimate exposure to IRSA mis-selling.