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Thousands of retail shareholders and a group of institutions are pushing ahead with a £1.25bn compensation claim against Royal Bank of Scotland over its 2008 rights issue, with a trial set for March next year.

The RBS Shareholder Action Group, which represents 27,000 retail investors, as well as institutions and local pension funds in the UK, has announced it plans to sue former RBS executives, including Fred Goodwin, as well as the bank, reports Emma Dunkley in London.

The announcement comes amid speculation that RBS will give an update in its third-quarter earnings tomorrow about potential settlements with other institutional shareholders over the rights issue.

The action group said: “We congratulate any claimant institutions that are nearing settlement, but we are conscious that some may feel short-changed by RBS’s low-ball offer.”

RBS is not expected to announce a settlement tomorrow, according to one person familiar with the situation.

Analysts predict that RBS will set aside £380m for litigation in its third-quarter earnings.

The shareholder group, which represents institutions including Bank of America Merrill Lynch, Abbey Life, Axa, Aberdeen Asset Management and Lloyd’s of London, alleges that former directors of RBS misrepresented its underlying strength at the time of the rights issue, which led to large losses for investors.

A few months after the rights issue, RBS received a £45bn bail-out from taxpayers.

RBS made a provision at half-year results to cover the litigation, which is understood to total less than £700m. However, the action group warns that the claims RBS faces from all the investor groups involved amount to more than £4bn.

In a separate announcement, a group representing small businesses who allege they were pushed into bankruptcy by a division of RBS, the former global restructuring group, are urging the bank to “pay quickly at least £2bn” to some 500 business.

David Stewart, director of the RBS GRG Business Action group, said:

“The longer RBS strings this out, the greater the likely compensation bill it will face. Our members’ losses are only the tip of the iceberg.

“Many other companies across the UK lost out to RBS GRG’s unlawful actions and now is the time to join the fight for full and appropriate compensation.”

RBS declined to comment.

Copyright The Financial Times Limited 2017. All rights reserved.

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