Taxpayers will get RBS cash back after next year, says Stephen Hester

By TOM PETERKIN
Published on 25/09/2012 23:59

ROYAL Bank of Scotland chief executive Stephen Hester yesterday suggested his bailed-out financial institution will resume dividend payments – including those to the UK government – after 2013.

Mr Hester said RBS was “nearing the point of becoming a

recovered bank” and should have completed its restructuring next year.

A presentation delivered by the RBS chief executive in London yesterday indicated that making dividend payments was a long-term aim of the bank after 2013.

The payments would include all those who hold ordinary shares. The UK government, which paid £45 billion to keep the bank afloat, holds 67 per cent of ordinary shares.

Mr Hester’s speech at Merrill Lynch’s annual conference for bank bosses was the first time he has given an indication of the timetable for paying back the billions of pounds RBS owes taxpayers.

In 2008, RBS was the recipient of the largest bail-out in history, when the bank stood on the verge of collapse under the

stewardship of Mr Hester’s pre­decessor, Fred Goodwin.

Mr Hester did warn there were still more “important execution challenges” to be overcome and it would require a wider economic recovery before the government could reduce its 82 per cent stake.

The overhaul at the bank includes trimming its investment banking arm, selling non-core businesses and focusing on high-street services in the UK.

The shake-up at its investment banking division will reportedly lead to 3,800 job cuts by the end of next year – 300 more than anticipated.

Mr Hester said: “RBS is nearing the point of becoming a recovered bank and well on the way to being a good bank. I hope by 2013 the restructuring phase should be largely complete, and I hope that our ongoing businesses should be largely retooled and performing at least in line with competitors, with robust, enduring and valuable franchises at that point.”

Mr Hester said the bank would have to contend with slow economies and uncertain regulatory impacts.

He added: “There are important execution challenges to get to this recovered bank status still remaining.”

Mr Hester said financial recovery would provide a platform for “a period of significant outperformance”, as demand for banking services improved in line with the economy.”

He added: “I hope this will provide a platform for privatisation to take place in due course.”

Mr Hester warned recent conduct issues, such as Libor fixing, which is being investigated at RBS would prove costly.

His suggestion that progress is being made comes after the beleaguered bank had to deal with another round of poor publicity as a result of a computer failure that prevented millions of its customers from accessing their accounts earlier this year.

He said: “We have to accept that the pendulum has swung, that society has a different attitude and determination to make sure that banks behave in a different way and improve their reputation.”

Meanwhile, Mr Hester said the bank was close to exiting the Asset Protection Scheme, in which taxpayers effectively insure its poorer-quality loans against future losses.