ROYAL Bank of Scotland admitted today that it would not be in a position to restore the dividend until early 2017 as a tripling of restructuring costs and more hefty litigation provisions helped tumble the group back into the red.
It came as the taxpayer-backed bank posted a £153 million loss for the six months to the end of June compared with a £1.4 billion pre-tax profit a year ago.
RBS said it planned to return capital to investors through dividends or share buybacks, but it would not happen until the first quarter of 2017 at the earliest as its lengthy recovery from nearly going bust in 2008 continues.
The news disappointed some of the bank’s City followers who had hoped for a dividend in 2016 after fellow-taxpayer backed bank Lloyds restored its dividend earlier this year after a lengthy gap since the financial crash.
Ross McEwan, RBS chief executive, said the bank was making progress but needed to get back in better shape, including getting through another two years of regulatory balance-sheet stress tests before a dividend was feasible.
“We think we are a couple of years behind Lloyds in terms of our restructuring,” he said. Ewen Stevenson, RBS finance director, added: “There were some analysts out there with expectations of capital distributions in 2016. We felt it was important to be transparent and to ground people in what we think is a realistic expectation.”
However, Mike van Dulken, head of research at Accendo Markets, said: “Shareholders might not like the sound of no dividend resumption before 2017, especially when bailout peer Lloyds has already cleared that hurdle.”
RBS’s return to the red came as the bank took another £1.5bn in restructuring charges as McEwan strives to make it a “simpler, safer” business.
He said that the bank wanted to go “further and faster” with its restructuring, and warned further unquantified job losses were likely over the next few years.
The lender also set aside £1.3bn for potential legal settlements for misconduct, of which £459m was taken in Q2. Most of that was likely to arise from sales of mortgage-backed securities in the United States, the bank said today.
In May, RBS and Japanese bank Nomura were ordered to pay $806m between them for making false statements when selling mortgage-backed bonds to US agencies Fannie Mae and Freddie Mac.
RBS has already paid £399m in fines to the US and UK regulators over the forex market scandal. The second quarter to end-June showed an improving picture at the bank, with profits up 27 per cent to £293m.
Mortgages did particularly well, with gross new lending up 43 per cent to £5.4bn.