Royal Bank of Scotland Group plc's (LON:RBS) court case brought by shareholders over its 2008 rights issue has been adjourned for a day after the lender made a desperate last-minute settlement offer.
The bank has reportedly nearly doubled the value of its legal settlement with the investors to 82p per share from the 43.2p it had previously offered, just hours before the case was due to begin in London's high court today. Reuters reported that shareholders were holding out for a settlement of 100p a share.
Jonathan Nash, QC for the shareholders, told a short hearing in the court that both sides were involved in settlement talks and that they were “hopeful of making progress".
The judge, Justice Hildyard, agreed to an adjournment until 10.30am tomorrow.
Some 9,000 individuals and 20 institutional investors are suing RBS on claims they were misled over the bank’s true financial state during the £12bn rights issue. It was meant to stabilise the bank but the government had to spend £45.5bn to bail it out.
Should the case go to court, the trial is expected to last 14 weeks.
Shares in RBS fell 0.34% to 262.0p in afternoon trading.
Fred Goodwin to give first public account on bank's near collapse...
Fred Goodwin, who was chief executive at the time of the rights issue, is due to be cross-examined on 8 June, the same day as the general election. He is to give evidence over two days.
It will be the first time Goodwin has spoken publicly about the events leading up to the bailout since February 2009 when he appeared before the Treasury select committee and apologised for “all the distress that has been caused”.
Goodwin was stripped of his knighthood in 2012 after overseeing the damaging €71.1bn takeover of Dutch ABN in 2007, which came just months before the rights issue.
RBS has already settled with 87% of the investors who had brought claims related to the rights issue but has not admitted liability.
The remaining shareholders suing the bank are demanding £520mln in compensation from the bank on claims they lost money on shares in the rights issue. The investors include US bank Wells Fargo, Bank of America Merrill Lynch, the Boeing pension fund and local British council pension funds.
RBS criticised over mounting legal costs...
RBS set aside £800mln to cover settlements with all of the shareholder groups at the end of last year and is expected to incur £125mln of legal fees. The hefty legal costs have drawn criticism from several politicians as the bank is still more than 70% owned by the government.
Former Business Secretary Sir Vince Cable has said that the legal costs were "obscene" and that taxpayers were having to fund the lawsuit.
Earlier this month, Chairman Sir Howard Davies, said: “The costs we are having to meet are high because of the extraordinary breadth and complexity of the case. And it is normal practice under company law, and indeed it is a legal obligation for the bank, that directors should be indemnified in relation to any third party civil legal action arising from their tenure at the bank."
RBS has been reporting annual losses since its bailout. In February it posted an eye-watering £7bn loss for 2016.
Chancellor Philip Hammond in April signalled that taxpayers will make a loss when the government sells its stake as it was likely to fetch a far lower price for shares than it paid in its bailout.