Big four UK banks could be on the mend after £66bn of charges in six years

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The UK’s big four banking groups have racked up £66bn of conduct and litigation charges in the last six years, a new report out today has estimated.

But analysts at S&P Global Ratings expect 2016 will “prove to be the last year in which charges remain at the outsized levels we have seen recently”.

The report, predicting that UK banks will begin to “emerge from their past misdemeanours”, estimated that Barclays, HSBC, Lloyds and Royal Bank of Scotland incurred charges of £10.8bn in 2016, down from the six-year peak of £14.5bn in 2015.

And the analysts expect charges incurred in 2017 to fall to between £9bn and £9.5bn.

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Between 2011 and 2016, S&P estimates that conduct and litigation charges totalled £66bn across these four lenders, representing 10 per cent of their revenues.

“Over the course of 2017, we expect total conduct and litigation charges to continue to gradually subside,” the report said.

“We believe 2016 will prove to be the last year in which charges remain at the outsized levels we have seen recently. That said, we acknowledge that new conduct issues may emerge and that the timing of such charges is uncertain, given the complex nature of pending legal settlements.

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“For example, RBS reported a £3.1bn provision in fourth-quarter 2016 related to legacy residential mortgage-backed securities lawsuits in the US, brought forward by the US Federal Housing Finance Agency.”

S&P also noted that the Financial Conduct Authority has extended the deadline for payment protection insurance (PPI) complaints to August 2019, “which could contribute to further charges”.

Full story: Big four UK banks could be on the mend after £66bn of charges in six years: City A.M.

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