A decade without dividends at RBS

After ANOTHER £2bn loss investors braced for . . .

LONG-SUFFERING investors in Royal Bank of Scotland face a decade without a dividend after the bank reported another £2bn loss.

And in a sharp turnaround from previous plans, the lender has dropped plans to spin off 300 branches under the name Williams & Glyn.

The bank said the punishing economic environment meant the new group would be unable to survive on its own. This network will instead be sold, with Santander thought to be a likely buyer.

The first-half profit fall means the bank has lost £53.7bn since it was bailed out by the taxpayer. This is £7.7bn more than the total that the Treasury ploughed into the bank from public coffers to keep it afloat during the financial crisis.

And NatWest owner RBS’s share price has crashed 97.4pc from its pre-crisis peak.

Taxpayers still own a 73pc stake, with shares far below the 502p at which they would get their money back from a sale.

Chief executive Ross McEwan said continued low interest rates and weighty penalties for historic bad behaviour meant a dividend would not be paid until 2018 ‘at the earliest’.

RBS was ordered to dispose of the Williams & Glyn branches after being rescued at the height of the financial crisis, but earlier this year said it might miss an end-of-2017 deadline. It has now decided they will be sold instead of creating a stand-alone bank, with sources naming Santander as a likely buyer.

This makes the process simpler but means that £1.4bn already spent on IT systems and other decoupling work has effectively been wasted. The network has hundreds of thousands of customers and is worth £1.3bn, although in the current climate the sale price is likely to be considerably less. It means the Williams & Glyn name, which disappeared in 1985, will not be returning to the High Street.

McEwan said this decision was made after the Brexit vote, which is likely to keep interest rates at record lows for even longer than expected. But he said it owed more to the global economic outlook, with a slowdown in China and the sluggish Continental economy taking rate rises off the table worldwide. Around 90pc of the work which would allow Williams & Glyn to stand on its own two feet has already been done.

But RBS feared it would struggle to survive, meaning the City watchdog would have been unlikely to grant the new lender a banking licence.

‘A more uncertain environment and lower for longer interest rates undermined its viability,’ chairman Sir Howard Davies said.

Losses at the bank were far higher than the same period a year earlier, when it was £179m in the red.

This was partly due to a £1.1bn payment to the Treasury which it was required to hand over before being allowed to give private investors a dividend. Another £1.3bn was set aside to deal with bad behaviour, including £450m for payments over PPI mis-selling. It means the scandal has cost the bank £4.7bn – money which could otherwise have gone towards bolstering profits.

RBS is also tackling a lawsuit from shareholders over a stock market fundraising bid at the height of the 2008 crisis, and is facing an investigation of tracker mortgages in its Ulster Bank.

In the future, it will have to deal with a long-running US investigation over toxic bundles of mortgage debt which could cost up to £8bn.

RBS shut 166 branches in the year to April and McEwan hinted at more closures. He also said further job cuts likely lay ahead.

‘You’re seeing less and less usage of the branch network and much more use of technology,’ he said.

However, bosses stressed there was a good business lurking behind the headline losses. They said adjusted operating profits – a measure stripping out one-off costs and currency fluctuations – were £1.2bn. And the bank said it was ready to support customers following the decision to leave the European Union.

‘We’re open for business, ready to lend responsibly and ready to play our part in this new chapter for the country,’ McEwan said.

RBS shares fell 7.2pc, or 13.8p at 178.2p.