‘A Milestone Moment.’ Why RBS Is So Happy to Pay the U.S. a $4.9 Billion Fine

Royal Bank of Scotland Group Plc said it reached a tentative agreement to pay a $ 4.9 billion penalty to resolve a long-running U.S. probe into its packaging and sale of mortgage-backed securities before the 2008 financial crisis.

While most of the cost will be covered by money the company already set aside, the deal will cut second-quarter earnings by $ 1.44 billion, the bank said in an emailed statement. Analysts had estimated the firm would pay more to resolve U.S. scrutiny of its mortgage business. At Deutsche Bank they projected $ 9 billion, and at Bloomberg Intelligence more than $ 11 billion.

“Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer,” RBS Chief Executive Officer Ross McEwan said in the statement. It’s “a milestone moment” and “the price we have to pay for the global ambitions pursued by this bank before the crisis.”

RBS (rbspf) has said it’s well-positioned to restore dividends once the case is over — yet talks kept dragging on, leaving it among a dwindling number of big lenders yet to resolve probes into crisis-era mortgages. Even now, the settlement in principle with the U.S. Department of Justice isn’t binding, “and there can be no assurance” both sides will agree on final terms, RBS said in the statement.

Terms Pending

The U.S. Attorney’s Office for the District of Massachusetts confirmed on Twitter that a preliminary deal was reached.

“Further details remain to be negotiated, however, before a formal agreement,” it said.

Further details remain to be negotiated, however, before a formal agreement can be reached.

— U.S. Attorney MA (@DMAnews1) May 9, 2018

There are signs other big banks may soon reach their own accords. In January, Wells Fargo & Co. (wfc) Chief Financial Officer John Shrewsberry told Bloomberg his firm would likely hash out terms this year. While he declined to discuss the potential cost, the firm took a $ 3.3 billion litigation charge late in 2017, mainly for mortgage-related issues.

Nomura Holdings may make additional provisions after booking more than 30 billion yen ($ 275 million) in costs tied to a U.S. probe into mortgage-bond sales before the crisis, a person familiar with the matter said last month. A Nomura spokesman declined to comment at the time.

In March, Barclays (bcs) agreed to pay $ 2 billion to settle its U.S. probe, securing a penalty less than half of what U.S. authorities originally demanded. The Justice Department originally wanted a fine of about $ 5 billion, but the British lender refused to pay any more than $ 2 billion, Bloomberg had reported in 2016.