RBS pays £1.7bn divi but warns Brexit may hit targets

UPDATE 3 — Royal Bank of Scotland on Friday announced a £1.7 billion dividend, of which more than £1 billion will go to the UK taxpayer.

However, RBS warned that deteriorating economic conditions before Brexit could derail next year’s profitability and cost targets.

RBS shares fell about 7%.

Unveiling its first-half results, RBS announced an interim ordinary dividend of 2p and a special dividend of 12p, representing £1.7 billion being returned to shareholders.

RBS is still 62%-owned by the UK taxpayer after its £45 billion bailout during the 2008 global financial crisis.

RBS reported a first-half operating profit before tax of £2.694 billion and an attributable profit of £2.038 billion.

But the company warned that some of its consumers and businesses struggled in the first half of the year amid fears of a disorderly UK departure from the European Union. 

RBS said such a tough outlook would make it “very unlikely” it would meet its target of achieving a 12% plus return on tangible equity — a measure of profitability. 

The bank said it would struggle to reduce its cost to income ratio to below 50% by 2020, although this remained its medium term goal.

RBS CEO Ross McEwan said: “This is a solid set of results in challenging market conditions.

“We have delivered our largest half year profit in more than a decade and have announced a further £1.7bn in dividends to shareholders, of which more than £1bn will go directly to the UK taxpayer.

“Given the uncertain and competitive environment, we are focussed on the areas we can control; costs are down, capital and liquidity are strong and we continue to grow lending to the real economy.”

Edward Firth, analyst at KBW, said: “This is overall another set of disappointing of results from RBS, which is now facing an extremely demanding operating environment.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.