RBS revives payout after ten-year gap despite profits fall

First dividends since banking crisis UK government set to receive £150m

Shareholders in Royal Bank of Scotland (RBS) are in line for their first dividend payout in a decade despite the bank suffering a drop in bottomline profits in the first half of the year.

The widely-expected revival of the payout – which will see the UK government bank around £150 million based on its stake in the group – comes as it starts to finally put the fall-out from the financial crisis behind it.

A major settlement with US authorities has cleared the way for the Edinburgh-headquartered group to pay 2p a share to investors although the timing depends on the finalisation of the agreement which relates to claims that it mis-sold-mortgages-in-the-run-up to the financial crisis.

The high street bank – which is still around 62 per cent owned by the taxpayer – reported £888m in bottomline profits for the half year to 30 June, down from £939m a year earlier but ahead of expectations.

The fall came after it was hit by £801m in litigation and conduct costs over the period, helping to cover the $4.9 billion (£3.7bn) settlement reached with the US Department of Justice (DOJ). Total income over the period dropped from £6.9bn to £6.7bn.

RBS chief executive Ross Mcewan said that with its major legacy issues “largely behind us” the group was fully focussed on improving the bank’s performance for customers.

“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 highlycompetitive environment,” he said.

As well as paying an interim dividend, the bank is now looking at the potential to return further excess capital to shareholders, including via special dividends or share buy backs, from 2019.

“Our intention has always been to get capital back into the hands of shareholders,” said Mcewan, although he stressed the bank would want any impact of Brexit first.

Callum D’ath, investment manager at Brewin Dolphin in Edinburgh, said that with most of the legacy issues resolved, the Prudential Regulation Authority “may soon give RBS its blessing to start to return excess capital to shareholders”.

Helal Miah, research analyst at The Share Centre, said the reinstatement of the dividend was a landmark step.

“It will not only give existing shareholders some confidence but also the large number of fund managers who could not invest previously due to the lack of any income.”

Alasdair Mckinnon, fund manager of the Scottish Investment Trust, said the dividend reinstatement marks the beginning of the end of a decade-long rehabilitation.

“It should lift demand for the shares and help RBS move out of government ownership. That will take some time but it is a positive development for shareholders.”