LONDON (Reuters) – Britain’s Royal Bank of Scotland (RBS.L) pays its first dividend since its near-collapse and state bailout in 2008, paving the best way for the federal government to additional scale back its stake in the lender.
FILE PHOTO: Royal Bank of Scotland indicators are seen at a department of the financial institution, in London, Britain December 1, 2017. REUTERS/Peter Nicholls/File Photo
Taxpayer-owned RBS stated it might pay an interim dividend of two pence per share, topic to the finalization of a $four.9 billion settlement with the U.S. Department of Justice (DOJ) over the financial institution’s sale of mortgage-backed securities in the run as much as the monetary disaster.
Until its settlement in May, the looming settlement had blocked RBS’s return to dividends, excluding a complete class of income-focused traders from shopping for its inventory.
Announcing the financial institution’s half-year outcomes, RBS CEO Ross McEwan stated the financial institution was now seeking to return additional extra capital to shareholders, together with through particular dividends or share purchase backs, from 2019.
“Our intention has always been to get capital back into the hands of shareholders,” he stated on a convention name with reporters, including that the financial institution would wish to have a look at the potential influence of Brexit earlier than making any main payouts.
The British authorities nonetheless holds a 62.four p.c stake in RBS, acquired with a 45.5 billion pound ($59.1 billion) state bailout through the monetary disaster.
The interim dividend cost would return 150 million kilos to authorities coffers, in response to a Reuters calculation.
It additionally expands the marketplace for future authorities share gross sales by enabling a broader array of traders to have a look at shopping for the financial institution’s shares.
RBS inventory nonetheless has not carried out nicely lately, dropping round 7.5 p.c between the first authorities share sale in June and Friday’s outcomes announcement.
The financial institution’s shares had risen nearly three p.c to 257.5 pence at 0745 GMT on Friday.
Bank of England Governor Mark Carney stated on Friday RBS’s outcomes have been one other signal the nation was shifting past the monetary disaster.
However McEwan signaled there might be new hassle forward for the British financial system. He struck a cautious tone on Brexit, saying that there was nonetheless uncertainty across the preparations between Britain and the European Union and that the financial system was working at its slowest fee in years.
RBS is making “an absolute assumption” that there shall be no ‘passporting’ of monetary companies as a part of any deal between the 2 sides, he added.
Such a deal would have allowed British lenders to proceed promoting their companies in Europe with out making main adjustments.
The financial institution reported a pre-tax revenue of 1.eight billion kilos for the first half of 2018, even after taking a 1 billion pound provision to cowl its settlement with the DOJ.
RBS’s frequent fairness tier one capital ratio – a measure of banks’ monetary energy – was 16.1 p.c, after accounting for the DOJ settlement, the influence of the dividend and after paying three.5 billion kilos to shore up its pension fund.
“Just because RBS is in a much better place than it was a decade ago doesn’t mean it’s all smooth sailing from here,” stated Fiona Cincotta, senior market analyst at City Index.
She pointed to powerful competitors in merchandise like mortgages, which had shrunk the financial institution’s internet curiosity margin – an indicator of financial institution profitability – and stated time will inform whether or not years of hefty cuts have left RBS much less capable of compete with its friends.
enhancing by Silvia Aloisi and Keith Weir