RBS moves a step closer to resuming dividend payments

Royal Bank of Scotland has paid £1.2 billion to the UK government in a 'milestone' move that paves the way towards the resumption of shareholder dividends.

RBS said the payment was a 'milestone' in its plan to resume dividends. Picture: Ian Rutherford
RBS said the payment was a 'milestone' in its plan to resume dividends. Picture: Ian Rutherford

The payment to HM Treasury has cancelled the so-called dividend access share (DAS), which gave the government priority over dividend payouts from the bank, which is 73 per cent owned by the taxpayer.

The DAS was issued in 2009, when the Treasury provided £25.5bn of equity capital to RBS in exchange for “B” shares. Under that agreement, the bailed-out bank paid an initial DAS dividend of £320 million in 2014. Yesterday’s payment means the DAS will be redesignated as a single “B” share, which will be cancelled.

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RBS chief executive Ross McEwan said: “On the back of progress we have made in strengthening the bank’s balance sheet in recent years, I am pleased that we are today able to repay the UK government £1.193 billion to finally retire the DAS.

“This is another important milestone in our plan to resume capital distributions to our shareholders, and represents one less hurdle in our path to build the number one bank for customer service, trust and advocacy.”

RBS last month racked up its eighth consecutive year of annual losses – posting a deficit of £2bn for 2015 – and said dividend payments to shareholders were unlikely to resume before the first quarter of next year.

Chancellor George Osborne sold a 5.4 per cent stake in RBS last year, raising £2.1bn, but making a £1.1bn loss on what taxpayers had paid for the shares.

Laith Khalaf, senior analyst at Hargreaves Lansdown Stockbrokers, said the payment to the Treasury represented “a step in the rehabilitation of RBS into a normal bank”.

But he added: “But there’s still an awfully long way to go. Dividends have been pushed back until the full extent of US conduct costs is out in the open, and the share price is still languishing well below what the government paid for the bank, which means it’s going to be some considerable time before it is weaned off taxpayer support.”

RBS shares closed yesterday down 2.1p at 233.4p, compared with a taxpayer buy-in price of up to £5.