Royal Bank of Scotland claimed it has achieved a milestone after paying £1.2bn to the Treasury to buy out a crucial part of its £45bn bailout.
The Edinburgh-based bank - still 73% owned by the taxpayer - is making the payment to end an agreement with the government which prevented it paying dividends to any shareholders before the Treasury.
This so-called dividend access share (DAS) was put in place in 2009 - although the loss-making bank is not yet ready to start making payouts to shareholders. The bank is not making a profit - it reported its eighth consecutive year of losses for 2015 in February - and may find that the £1.2bn payment to the Treasury will make it hard to make a profit in the first quarter of 2016.
Ross McEwan, chief executive of RBS, said: “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.”
A number of obstacles remain in the way to payouts to shareholders, including a potential multibillion pound penalty from the US authorities for the way it sold mortgages in the run up the crisis, the spin out of the branch network known as Williams & Glyn and the need for a strong result in the stress tests from the Bank of England at the end of the year.
George Osborne is hoping to generate £25bn of revenue from the sale of RBS shares in this parliament, although the Office for Budget Responsibility has concludedthat he will have to sell off the entire remaining stake by 2020 if he is to achieve that goal. In documents alongside last week’s budget the Treasury’s independent forecasters warned that the bailout of the banking sector after the 2008 crash could leave taxpayers with £17.5bn of losses.
Taxpayers break even on their stake in RBS at 502p. On Tuesday morning the share price was trading at around 232p, down about 1.5% on the previous day’s close.
This article was written by Jill Treanor, for theguardian.com on Tuesday 22nd March 2016 09.14 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010