The Royal Bank of Scotland Group plc
) legal hassles aggravates as
Lloyds Banking Group plc
) gets involved in a class-action lawsuit against the company,
according to a report by
. Lloyds Banking Group is set to claim £420 million ($709 million)
owing to The Royal Bank of Scotland's management of manipulated
rights issue worth £12 billion.
Lloyds Banking Group, the government backed financial institution,
is taking legal action through nine of its pensions and investment
management subsidiaries including Scottish Widows Plc, Scottish
Widows Unit Fund Ltd, Pensions Management Ltd and Clerical Medical
Investments Group. Additionally, 40,000 individual and
institutional investors stand as plaintiffs.
Notably, Royal Bank of Scotland, 80% of which is currently
owned by the British government, has already been sued in an
extraordinary group action lawsuit in which hundreds of investors
joined recently and claim compensation of around £4 billion. It
accuses Royal Bank of Scotland of misguiding investors during
emergency rights issue in 2008.
During the financial crisis, the former CEO of Royal Bank of
Scotland - Fred Goodwin - along with other top management
executives authorized emergency rights issue in 2008 in order to
raise £12 billion for bolstering the reduced capital levels.
Notably, the company's capital position deteriorated owing to the
acquisition of a certain unit of ABN Amro business and a
significant loss on U.S. credit market assets.
Also, under Goodwin's leadership, Royal Bank of Scotland expanded
recklessly in the global markets. In the wake of the financial
crisis, the company reached the verge of bankruptcy that led
shareholders to incur loss of about 80% of their investments.
Investors accuse Royal Bank of Scotland of concealing its actual
capital position and stated that it had faulty risk management and
control measures. Also, it alleges that the company did not
disclose the weak status of the transition process with ABN Amro
Though the Royal Bank of Scotland denies accusations on it former
directors, nothing can be said with certainty until the matter is
Recently, trading of the shares under the emergency rights issue
marked the six-year anniversary. This raises concerns for the
investors that they may no more be eligible for compensation under
Royal Bank of Scotland currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the foreign banks space include
Australia & New Zealand Banking Group Limited
) and Brazilian bank
Banco Bradesco S.A.
) Both the stocks carry a Zacks Rank #1 (Strong Buy).
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