Shareholders’ relief after decade of woe as RBS is set to pay out its first dividend since the crash
- RBS has not paid a dividend since the early months of 2008
- Several City experts are predicting a dividend will be announced next week
Hopes are rising that Royal Bank of Scotland will this week pay its long-suffering shareholders their first dividend since the days of former chief executive Fred Goodwin.
A payout would delight the City and pave the way for the Government to further reduce the taxpayer’s stake by selling off another chunk of shares later this year.
The bank has not paid a dividend since the early months of 2008. It was bailed out with £45billion of public money in the thick of the financial crisis just months later.
Analysts said the bank now has enough cash to comfortably pay a dividend
Several City experts are predicting a dividend will be announced when RBS releases its half-year results on Friday.
Analysts at investment bank Morgan Stanley said it could pay 2 pence per share, which would net shareholders a total of £240million.
Such a payout would represent a boost of almost £150million to the public finances as the Treasury still holds a 62 per cent stake.
It is believed the bank feels it can pay dividends again because it has now settled with the US Department of Justice over sub-prime mortgage issues.
RBS is paying a £3.6billion fine over its sale of financial products linked to risky mortgages. There had been fears that the fine would be much larger, meaning the bank would not want to funnel cash into dividends.
Analysts said the bank now has enough cash to comfortably pay a dividend. Morgan Stanley said RBS’s core capital ratio – a measure of its financial strength – will be 15.6 per cent when it reveals its numbers this week. Chief executive Ross McEwan is aiming to keep the ratio at 14 per cent, meaning it will have an excess to use for a dividend.
The announcement of a dividend could make it possible for the Chancellor to sell more shares.
Under the terms of the last sale in June at 271p per share, the Treasury cannot launch a new offering until September. The shares are trading at 249.6p, but the price is likely to rise if the dividend returns as they will then become attractive to investors keen on earning an income.
But some observers believe shareholders will have to wait longer as Ewen Stevenson – the bank’s chief financial officer who would lead any decision to make a payout – is leaving to join HSBC.