RBS to Pay Dividend for First Time Since Bailout

Royal Bank of Scotland is to pay out a dividend for the first time since being bailed out by the UK government in 2008

Emma Wall 3 August, 2018 | 9:28AM
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Royal Bank of Scotland RBS downgrade bank financial UK equity

Royal Bank of Scotland (RBS) has announced plans to resume paying a dividend for the fist time in over a decade. The bank has proposed an interim dividend of 2p per share, its first payout since the financial crisis. RBS was bailed out by the taxpayer in 2008 to the tune of £45 billion, and has yet to return to full private ownership. 

Lloyds (LLOY), the other high street bank propped up by the government in the depths of the recession, returned to private ownership in May 2017 having reintroduced dividends two years earlier at 0.75p per share.

RBS management had previously indicated that as soon as it had reached a settlement with the US Department of Justice relating to residential mortgage-backed securities litigation it would reintroduce a dividend for shareholders. 

Morningstar analysts are maintaining their 290p a share fair value estimate, above the current price of 257p. "We believe RBS is not over the hill just yet, although progress is looking promising," says analyst Niklas Klammer in a note today. "We prefer Lloyds as a UK-centric bank," he adds.

"RBS is looking to increase the dividend payout ratio to about 40% over time, while considering further capital distributions alongside regular dividends."

RBS confirmed in today's interim results it would be waiting for the Department of Justice settlement before paying the dividend, stating:

"We intend to declare an interim dividend of 2p per ordinary share. Declaration of the interim dividend is subject to the timing of finalisation of the previously announced civil settlement in principle with the Department of Justice in relation to the Department of Justice's investigation into RBS's issuance and underwriting of US RMBS.

"We expect to finalise the settlement with the Department of Justice and will make a further announcement at the relevant time."

Barclays and Lloyds Raise Dividends

Barclays (BARC) posted mixed results on Thursday; announcing intentions to up the interim dividend despite a sharp decrease in its first half profit, owing to a conduct charge paid to the US Department of Justice and payment protection insurance (PPI) claim provisions.

The bank declared an interim dividend of 2.5p per share and reiterated the intention to pay a dividend of 6.5p per share for 2018, subject to regulatory approvals. This is up from the previous interim dividend of 1p per share, and above analysts’ expectations.

Lloyds is planning to raise its interim dividend to 1.7p, up from 1p the previous year.


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Barclays PLC218.25 GBX-0.39Rating
Lloyds Banking Group PLC54.76 GBX-1.48Rating
NatWest Group PLC310.90 GBX0.48Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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