Royal Bank Of Scotland Loses Battle To Retain Documents

The Royal Bank of Scotland Group (LON:RBS) plc (TO:RBS) has been ordered to hand over all transcripts, notes and interview records, relating to the shareholder call case, as it recently lost a battle to keep possession of these documents. The news was first reported by Reuters.

Earlier this year, various retail investor groups sued the bank for misrepresenting its financial health during its £12 billion ($15 billion) rights issue, at the height of the financial crisis in 2008.

The bank tried to settle the claim with an £800 million out-of-court deal, which was accepted by only the institutional investors. (Read more: Royal Bank of Scotland to Pay $1B Over Right Issue Charges)

Recently, one of the groups, consisting of 27,000 investors, who think that the documents are important for them and might support their case in the future, called for a judgment. In the judgment, the bank tried to prove that the documents were legally privileged and confidential and hence, wanted to retain them.

However, Judge Robert Hildyard rejected the bank’s attempt. He said, "I accept that the court has discretion to prevent disclosure and inspection, or impose conditions, in an exceptional case ... But I have not been persuaded that this is such a case."

The bank wants to retain the documents as it contains information about the internal investigations that it made into its sub-prime exposure and into allegations made by a former RBS employee, who continuously warned the managers that the bank was over-valuing its fixed-income portfolio.

However, shareholders who have been defrauded brought an application against the bank forcing it to disclose all the documents, as they are of the opinion that the documents could act as a "major breakthrough" in their case.

According to a spokesman for the shareholder group, "New documents, which have now been deemed admissible by the court, are thought to contain damming evidence against the bank and its conduct in relation to its RBS Greenwich Capital arm and its exposure to U.S. sub-prime mortgages."

In its response, Royal Bank of Scotland said that it might make an appeal to the judgment.

This lawsuit is an added concern for the company, which has already been facing numerous litigation issues.

Notably, shares of the company declined over 37% on the NYSE, year to date, significantly underperforming the 8.1% gain of the Zacks categorized Foreign Banks industry over the same time frame. Along with its internal issues, the Brexit referendum largely led to this stock price decline.



Currently, Royal Bank of Scotland carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space include, Societe Generale (PA:SOGN) Group (OTC:SCGLY) , Itaú Unibanco Holding S.A. (NYSE:ITUB) and Banco Santander (MC:SAN) (Brasil) S.A. (NYSE:BSBR) .

Societe Generale has witnessed an upward earnings estimate revision of 11.4% for the current year over the past 60 days. Moreover, its share price is up 7.2% year to date. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Itaú Unibanco currently carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of nearly 3% for the current year over the past 60 days. Its share price is up 69% year to date.

Banco Santander also carries a Zacks Rank #2 and witnessed an upward earnings estimate revision of 75% for the current year over the past 60 days. Also, its share price has gained significantly year to date.

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