Will RBS Be Fined As Much As Barclays?

During the company’s third-quarter earnings conference call, the Royal Bank of Scotland’s (NYSE:RBS) Chief Executive Officer Stephen Hester told reporters that no matter the size of the fine the bank receives as a settlement of the Libor scandal, “it will still be a miserable day in RBS’s history.”

Despite reporting third quarter operating profits on Friday that beat analysts expectations, the bank’s expected fine clouded the quarter’s results. The regulatory probe has thus far eclipsed Hester’s attempt to restructure the company after its 2008 bailout left RBS 80 percent taxpayer-owned.

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RBS is one of more than a dozen banks across the world that have faced allegations of manipulating the London interbank offered rate, the benchmark for more than $300 trillion of securities. Barclays (NYSE:BCS) received a fine of 290 million pounds, or $467 million, in June, but RBS has yet to settle the claim. However, the company is preparing to enter talks with regulators.

As a result of the ongoing probe, RBS has fired four traders and suspended its head of rates for Europe and the Asia-Pacific region. Bloomberg has reported that the bank’s own investigation into its role in the Libor-rigging scandal has revealed that traders and managers regularly attempted to influence the firm’s Libor submissions between 2007 and 2010 in order to profit from derivative bets.

The lender announced Friday that it would set aside a further 400 million pounds in payment protection insurance to compensate customers who were wrongly sold loan insurance derivatives. This additional sum will bring the amount allocated to 1.7 billion pounds. According to the Guardian, this could be the “costliest mis-selling scandal in history.”

For the three-month period ended in September, RBS reported a net loss of 1.38 billion pounds, down from the 1.23 billion-pound profit the company reported in the year-ago quarter. The loss far surpassed the expectations of Bloomberg analysts who had predicted a loss of 276 million pounds. However, it did include a 1.46 billion-pound accounting charge on the fair value of the bank’s debt. In comparison, the bank’s operating profit rose to 1.05 billion pounds from 2 million pounds year-over-year.

Looking to the future, Finance Director Bruce Van Saun said to Bloomberg Television, “You will start to see a very clean bank and the chance potentially to put a dividend back in place in 2014 and that will create further grounds for the government hopefully to have the option as to selling some stock.”

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