RBS to pay first dividend in 10 years

Royal Bank of Scotland has announced plans to pay its first dividend since it was bailed out by the UK taxpayer to the tune of £46 billion a decade ago.

The bank, which remains more than 60 per cent state-owned, said it would be paying 2p a share as an interim dividend as soon as its $4.9bn (£3.8bn) settlement with the US Department of Justice over mortgage-backed securities was completed.

The Edinburgh-based lender unveiled its plans after posting a fall in first-half profits fall on the back of that US settlement.

The impairment meant that RBS banked lower profits for the January-to-June period than in 2017.

RBS reported an attributable profit of £888m and an operating profit before tax of £1,826m for H1 2018.

RBS booked a £1bn charge to deal with the settlement with US regulators, which was agreed in May.

It relates to RBS’s mis-selling of the securities in the run-up to the financial crisis.

The bank had already put aside money to cover the rest of the cost.

It said it expected the deal with the DoJ to be finalised within months, paving the way for the dividend to be paid out.

The bank’s Common Equity Tier One capital ratio stands at 16.1 per cent. This includes the negative impact of the pension contribution, the settlement in principle with the DoJ and the intended dividend payment.

RBS CEO Ross McEwan said: “We are pleased with the progress we’ve made in the first half of 2018 and see these as a good set of results in a more uncertain and highly competitive environment. We are also pleased to announce an intention to pay our first dividend in ten years, subject to a final settlement with the DoJ.

“Our sector is undergoing significant change and we are positioning ourselves well to compete. We still have a lot more to do to achieve our ambition of being the best bank for customers in the UK and Republic of Ireland. However, with our major legacy issues largely behind us, we are able to fully focus on closing this gap.”

Callum D’Ath, investment manager at Brewin Dolphin in Edinburgh, said: “The banking environment in the UK remains challenging and the outlook is uncertain. Royal Bank of Scotland’s share price has declined since May, partly due to ongoing net interest margin pressure driven by competition. However, now that most of the legacy issues have been resolved, the Prudential Regulation Authority (PRA) may soon give RBS its blessing to start to return excess capital to shareholders”