ROYAL Bank of Scotland secured a landmark deal with the European Union last night which paves the way for it to eventually begin repaying dividends to shareholders.
Under the EU ruling, RBS will pay the UK government £320 million in the next 45 days and the remaining £1.18 billion over a period of time, allowing the Treasury’s golden share to beretired.
The dividend access share (DAS) was created in 2009 as part of the bailout package when the government injected £25.5 billion of equity into RBS in the form of B shares on top of an initial £20bn.
Other elements of the bailout have been paid off and among other benefits, the retirement of the DAS will in future allow RBS to reinstate a dividend policy to existing and potential investors.
Ross McEwan, chief executive, last night hailed the decision as an important milestone in the normalisation of the bank’s capital structure.
“Today’s agreement is a vote of confidence in the progress we have made in rebuilding RBS and in our plan for the bank’sfuture,” he said.
“We need to get on with building an RBS that can earn the trust of our customers and help change UK banking for the better.”
In accordance with the EU approving the restructuring plan, RBS was required to make a series of divestments and behavioural commitments, one of which was the sale of branches. A deal to sell 312 outlets to Santander fell through and these are being re-packaged under the reborn Williams & Glyn brand.
Following the collapse of the Santander deal, RBS has succeeded in securing a three-year extension to the deadline for selling Williams & Glyn. The deadline of December 2013 has been pushed back to December 2016 for an initial tranche of shares to be sold in an initial public offering and for completion of a sale to be achieved a year later.
Citizens Financial Group in the US will be disposed of by 31 December 2016, with an automatic 12-month extension if market conditions indicate that an IPO or subsequent tranches of disposal cannot be completed in an orderly fashion or at a fair value.