RBS faces branch closure grilling at investor meeting

● Chief executive Ross Mcewan to stress ‘positives’ of recent US legal settlement

Royal Bank of Scotland is braced for fresh fire over branch closures at its AGM this week, as its boss is expected to try to allay anger by saying the bank has turned the corner following its $4.9 billion (£3.6bn) settlement with US regulators.

It follows RBS reaching a deal in principle earlier this month with the US Department of Justice (DOJ) over the mis-selling of mortgage securities in the run-up to the financial crisis in 2008 that led to the bank’s taxpayer bailout.

Group chief executive Ross Mcewan is set to tell investors attheagmonwednesdaythat the “milestone” agreement, which has yet to be finalised, paves the way for the re-privatisation of the lender and the resumption of dividends.

Shareholders have not been paid a divi since RBS received its state bailout, when the bank crashed to a record UK corporate loss of £24bn.

Mcewan said earlier this month that the bank would have conversations with the regulator “in the next month or so” over relaunching shareholder payouts, which equity analysts at Jefferies expect could start at 6p per share.

Chancellor Philip Hammond has said RBS’S civil settlement agreement will “remove a major uncertainty for the UK taxpayer”.

Donald Brown, head of private clients at wealth manager Brewin Dolphin in Edinburgh, told The Scotsman: “Mr Mcewan is likely, rightly, to focus on the huge positive of the DOJ settlement. The business has turned the corner in terms of finance.

“He can say ‘we have saved the bank’, and maybe something about dividends as RBS has been much slower than Lloyds to restore dividends after their bailouts.

“But I suspect there will be a groundswell of resistance at the AGM to the continuing branch closures by RBS. Attendees tend to be smaller private shareholders and they tend to be much more vocal about issues that are close to their heart.

“It’s guaranteed. Branch closures across Scotland are still a very live issue.”

Another institutional investor said: “The controversy about branch closures are more likely to dominate the meeting. The effect of the DOJ legal settlement is still too much like jam tomorrow currently.”

Mcewan is expected to stress that the decision of how and when to sell down the taxpayers’ remaining 72 per cent holding in the bank is up to the government.

He did say immediately after the DOJ settlement, however, that it was easier for the government to sell a “clean” bank, with no major remaining legacy issues related to its gung-ho expansion under former chief executive Fred Goodwin.

RBS said $3.46bn of the proposed DOJ settlement will be covered by existing provisions and the bank will take a $1.44bn hit in its Q2 results.

The settlement – which had weighed heavily on the bank and its share price in the run up to the announcement – was lower than City expectations.