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RBS boosts FTSE despite £3.1bn US mis-selling hit

Investors welcome clarity on threat of US mis-selling fines, as Royal Bank of Scotland nearly doubles existing provisions.

 
RBS boosts FTSE despite £3.1bn US mis-selling hit

Royal Bank of Scotland (RBS) has led the FTSE 100 higher as investors welcomed some clarity over the threats of fines related to alleged mis-selling of mortgage backed securities in the US.

Shares in the bank jumped 4.4% to 237.6p despite a £3.1 billion provision to cover a settlement with the US Department of Justice, almost doubling the amount set aside for US mis-selling claims. That helped the FTSE 100 rise 13 points, or 0.2%, to 7,177.

'Putting our legacy litigation issues behind us, including those related to residential mortgage-backed securities, remains a key part of our strategy,' said Ross McEwan, RBS chief executive.

'It is our priority to seek the best outcome for our shareholders, customers and employers.'

Laith Khalaf, senior analyst at Hargreaves Lansdown, said investors appeared relieved the amount set aside was not higher.

'The fact RBS shares rose on the back of the news shows the market welcomes the additional step towards closure on this issue,' he said.

'Expectations over the size of the settlement have been lowered since the Department of Justice shocked markets last year by suggesting that Deutsche Bank may be on the hook for a $14 billion fine for similar misdemeanours; in the end the cost came in at $17.2 billion.

'Today's announcement gives the market an additional steer, directly from RBS, as to what the cost of US litigation may be.'

RBS was joined at the top of the index by Diageo (DGE), up 4.6% at £22.39 after the drinks company reported better-than-expected sales, helped by improvements in its US business.

Whitbread (WTB) was the biggest FTSE 100 faller, down 4.5% at £38.78 after reporting a weak performance from its Premier Inn  hotel business in London, marring a solid sales rise from its Costa Coffee chain.

Unilever (ULVR) was also among the fallers, down 4.4% at £32.03 on lower-than-expected sales figures for the fourth quarter, blamed on Brazil's weak economy and India's anti-corruption drive, which has seen high denomination bank notes taken out of circulation.

Among 'small cap' stocks, Lonmin (LMI) tumbled 14.4% to 152.5p after  the South African miner reporting a drop in platinum production in the first quarter.

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