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Lloyds to net millions as RBS settles over Goodwin cash call

Royal Bank of Scotland (RBS) is to pay out millions of pounds to a rival state-backed lender as part of a settlement of shareholders' legal claims to be unveiled next week.
Sky News has learnt that Scottish Widows, the insurance and pensions division of Lloyds Banking Group, will be among the recipients of substantial sums when RBS settles long-running lawsuits over a £12bn capital-raising in 2008.

RBS' rights issue, led by then boss Fred Goodwin, was designed to strengthen its balance sheet as the financial crisis deepened in major western economies.

Instead, the bank was forced into the arms of taxpayers just months later when the Treasury injected capital ultimately totalling more than £45bn.

Sources said this weekend that Scottish Widows and other Lloyds subsidiaries such as Clerical Medical Investment Group and Halifax Life had agreed in recent days to settle their claims against RBS.

They are being represented by Mishcon de Reya, the City law firm, alongside fellow claimants including the wealth management arm of Investec, the Anglo-South African financial services group.

The settlements will highlight the quirk of one taxpayer-backed bank paying out tens of millions of pounds to another in compensation.

Sky News revealed on Friday that RBS was on the brink of announcing that it had settled the rights issue litigation with two other claimant groups.

One comprises five leading institutional investors represented by the law firm Quinn Emanuel: Aviva, Legal & General, Prudential-owned M&G Investments, Standard Life Investments and the Universities Superannuation Scheme.

The other is a consortium of 313 institutions which collectively bought approximately 650m shares in RBS' 2008 rights issue at a price of either £2 or £2.30 apiece.

That claimant group, represented by Stewarts Law, includes Europe's largest pension fund.

In total, RBS is expected to pay out hundreds of millions of pounds to the investors which have taken legal action against it, although this week's settlement is unlikely to significantly dent its capital position because the bank has already taken charges of about £800m for the litigation.

Insiders said on Saturday that the settlements with the three groups of claimants could be announced early next week, although they cautioned that the timing could yet slip.

In a statement issued to Sky News, RBS said: "We have always been clear that the bank is open to exploring an out of court settlement, consistent with our legal obligations."

Two other groups of shareholders suing RBS will not be part of the settlement.
These are the RBoS Shareholder Action Group, representing 27,000 retail investors, which has vowed to ensure that the bank's former top executives appear in court, and the RBS Rights Issue Action Group, which is being represented by law firm Leon Kaye.

The Lloyds subsidiaries and Investec were previously members of the RBoS group, but split off from it last year.

Next week's settlements will be one of the final acts at RBS overseen by Jon Pain, its chief conduct and regulatory affairs officer, who joined the bank three years ago after a stint at the City regulator.

RBS is continuing to face a torrent of regulatory headwinds, and was the only one of seven major British lenders to effectively fail tough stress tests undertaken by the Bank of England this week.

The scale of the payouts to investors will underline the extent to which the ghost of Mr Goodwin continues to haunt RBS eight years after it was rescued by taxpayers.

In total, shareholders have claimed that they are owed more than £4bn by RBS, although it is unclear how much of that sum would ultimately be forked out.

To date, more than £100m has been spent by the bank defending the claims, one of which names Mr Goodwin and other former RBS directors among the defendants.

An attempt by RBS to reach a settlement took place during the summer, it said recently.

A six-month trial is scheduled to get under way next March, although the bank's current leadership team has been keen to avoid the distraction of such a high-profile case during a period of continuing economic volatility.

RBS remains more than 70%-owned by British taxpayers, and there is little prospect of the rescue costs ever been recouped given the extent to which it has been reshaped since 2008.

It faces having to pay a fine running to billions of pounds to the US Department of Justice over the mis-selling of mortgage-backed securities before the financial crisis.

Last month, it set aside £400m to compensate small business customers who have alleged mistreatment by the bank.

Ross McEwan, RBS' chief executive for the last three years, is also attempting to agree the sale of a chunk of its business which it was ordered to offload as part of the state aid deal related to its rescue.

Mishcon de Reya could not be reached for comment while a Lloyds spokesman declined to comment.

SKY  News.

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Lloyds to net millions as RBS settles over Goodwin cash call


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