Retail shareholders hold out for better deal in RBS lawsuit

Hayley Kirton
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A Royal Bank of Scotland branch signboar
The shareholders claim they were misled into buying shares in the bank (Source: Getty)

A subset of shareholders suing RBS over how it handled a financial crisis fundraising are holding out for a better deal, despite other investors closing in on an out of court offer.

Shareholders are currently due to face off against the bank in court next March, claiming the lender misled them into taking part in a 2008 rights issue to prop up the bank to the tune of £12bn. The bank almost collapsed and received a £45.5bn taxpayer bailout just months later.

Sky News reported late last week that RBS could soon strike a deal with two groups of institutional shareholders, represented by law firms Quinn Emanuel and Stewarts Law, who are bringing the claim, with an announcement potentially due within days.

Read more: RBS on renewed drive to cut costs after stress test flop

City A.M. understands a third group, the RBoS Shareholder Action Group, which is made up of more than 27,000 retail and institutional investors, is unimpressed with what the bank has offered so far and is digging its heels in for a better deal.

RBS, which is still 73 per cent owned by the government, has been hit by a slew of legal problems in the last few years. The bank is facing a potential mega-fine from the US Department of Justice for mis-selling mortgage-backed securities, with some estimates pegging the size of the penalty as high as $12bn (£9.4bn).

The bank also announced last month it was setting aside a £400m compensation pool to pay small business customers over claims the bank treated them poorly when assigning them to its Global Restructuring Group.

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The lender also found itself in hot water last Wednesday when it was revealed to be the weakest of the seven lenders examined in the Bank of England's stress test.

RBS, which has failed to turn a full-year profit since 2007, has had to submit an updated capital plan as a result, which will likely see it bolster its efforts to reduce costs and shed remaining non-core assets.

RBS declined to comment. A spokesperson for the RBoS Shareholder Action Group declined to comment, while representatives for the other two groups did not respond to City A.M.'s request for comment.

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