RBS pays special dividend on strong profits but Brexit hampers outlook

Ross McEwan

They showed a special award of 12p-per share was being handed to investors, on top of a 2p ordinary award.

The bank said it amounted to a payout of £1.7bn in total.

The bank, which was rescued from oblivion by the UK taxpayer at the height of the financial crisis in 2008 at a cost of £45 billion, reported a 46 per cent rise in operating profits compared to the same period last year, coming in at £2.7bn.

RBS said that profits attributable to shareholders, its bottom line measure, more than doubled to just over £2bn.

The sum was boosted by a £700m gain from selling its stake in Saudi bank Alawwal.

The bank said it would meet its financial forecasts for this year but pressures remained in the form of the highly competitive nature of the current mortgage market and depressed loan demand due to Brexit uncertainty.

It admitted these mean it was likely to miss profitability and cost goals for next year, saying they were now being seen as medium-term objectives.

Shares fell more than 5 per cent in response as trading began on the FTSE 100.

Outgoing chief executive 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 £1.7 billion in dividends to shareholders, of which more than £1bn will go directly to the UK taxpayer.

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

Donald Brown, head of private clients at Brewin Dolphin Edinburgh, said: “RBS is a very different bank to what it once was. Profits for the first half of the year beat expectations, confirming that the group is on a path to redemption. While there are cautionary words around hitting some of it targets against the backdrop of Brexit, RBS appears to be in stronger shape – a fact reflected in its ability to pay a special dividend to long-suffering shareholders, following the sale of its stake in Saudi bank Alawwal. There are plenty of positives in these results, but its UK focus and the government’s remaining stake will likely continue to weigh down the share price in the short term. The special dividend will provide a hard-earned £1bn boost to the Exchequer.”

The bank did not issue any update on its search for Mr McEwan’s successor.