| Banks, PPI, PPI Refund, PPI Scandal, Royal Bank of Scotland PPI Claim

As soon as the PPI scandal unfolded, it wasn’t difficult for the culprits to be discovered. According to the victims, majority of the PPI offenders were the banks and card companies that were trusted the most by their customers and clients.

After this revelation, the amount of complaints increased at an alarming rate, which put every single bank under pressure. While the elite banks were able to deal with the issue better, the remaining defaulters had to face a hard time in making the compensations.

The Royal Bank of Scotland (RBS) was one of the chief offenders of the PPI scandal. Unlike other high-end banks, RBS has been struggling to go into profits due to the heavy-lifting needed to be done for looking after the needs of their mis-sold customers. Otherwise a highly reputed financial organisation, RBS had to set aside huge PPI provisions on a regular basis that considerably affected the earnings of the bank.

 

The Year from Hell for RBS?

2015 is considered to be the worst year for RBS, as it had to set aside a sum of £2.5 billion only for the purpose of making PPI refunds. The bank also made a statement saying that they would accelerate the money transfer into their pension funds in order to plug in the extra deficit created due to the PPI issue.

Also, by 2015, RBS had been going into severe losses for eight consecutive years! Along with the PPI scandal, the banking company was also charged of selling toxic mortgage bonds to their customers before the entire PPI issue broke out.

RBS was then reported to have been taking assistance from the US and its financial authorities to help them settle all the accusations being charged on them. This is because the bank had to pay an additional amount of £1.5 billion in order to cover the civil litigation bill and it still has to set aside more funds in order to cover the claims pertaining to the Department of Justice as well as well as those of the states’ Attorney General.

After going through this disastrous phase, RBS has finally breathed a sigh of relief. After more than a decade, the bank has been reported of having made a profit in the latest financial year. Since 2007, the bank had been facing severe crisis, majority of which was setting aside exclusive funds for compensating for the PPI scandal.

The bank was considered to be one of the biggest when it came to the valuation of their assets, but everything had gone downhill after the infamous PPI issue broke out. The bank also had to fire more than half of their employees to keep the firm going.

 

Rising Once You’ve Hit Rock-Bottom

However, the bank finally seems to be recovering from their dark period and has finally reported their profit after ages. This Edinburgh-based banking company minted a net profit amounting to £752 million in the year of 2017. This is no less than a war won, as RBS reported a loss of more than £7 billion the very previous year. Moreover, the cumulative losses between 2008 and 2016 suffered by the bank are reported to have been valued around £59 billion.

The operating profits of the bank in 2017 came to £2.239 billion, which is a jump of £6.321 billion recorded in the previous year. The operating losses in the fourth quarter of the financial year before taxation had amounted to £583 million. Also, the company shares sank by 4% according to the current scenario of the European market.

In a recent interview, the CEO of RBS, Ross McEwan made a statement saying that their financial strength has now become much clearer. They had always been certain about the goals they needed to achieve, and strived for years in spite of facing dire losses on a regular basis.

On being asked about his plans of making the firm better than it previously was, Ross answers that the company has to focus more on cost reduction to reap in greater profits in the years to come.

Concluding the interview, Ross said that he is immensely proud of the bank for enduring years of financial hardships and that their current profit is the proof of how efficiently the financial institution has been managed by the executives.

 

Outstanding Issues Still Haunt RBS Despite Its Impressive Recovery

However, in spite of all the profits earned praises received, RBS still awaits the final call about the settlement to be made with the US Department of Justice (DOJ). As mentioned earlier, RBS contacted the States when it was accused of selling toxic mortgages to its innocent customers.

The issue has been taking time due to the already suspicious reputation of the bank due to the PPI issue. As the bank was already going into losses for years at a stretch, there was no surety of getting into any sort of contract or deal with the firm that dealt with money.

Now, as the bank has reported decent profits, the issue is likely to be sorted out as soon as possible. However, this has still held back the bank executives to celebrate their first profits, as it can lead to complicating the issues if the DOJ rules a statement against the bank’s favour.

RBS also has an impending penalty from the DOJ, which is likely to hamper their profits in the year of 2018. The bank apparently has to work harder and smarter to take care of this breach in their financial treasury, which has the power to single-handedly bring down the hard-earned reputation of the bank after the recent plunge into profits.

As the bank also has a major stake of the Government, the selling of these shares in order to get done with all the penalties can result into disastrous scenarios, the most prominent being the looming pressure on the share prices. There is a need of an immediate agreement that would have to be made if the bank decided to sell of the 73% shares that are held by the Government.

In spite of all the settlements being assumed to get settled last year itself, the issues still seem to be bothering the bank. All the bank and its shareholders can hope is a quick settlement, so that they can finally celebrate the joy of their hard-earned profits.

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