Royal Bank of Scotland bowed to pressure from shareholders yesterday and promised to return up to £1bn to them by buying back shares over the next year.
The country's second-biggest back, after HSBC, also lifted its final dividend by a hefty 29 per cent, making for a total of 72.5p a share for the year, 25 per cent more than in 2004.
Sir Fred Goodwin, RBS's chief executive, downplayed widespread speculation that the bank's big investors had pushed him hard for the return of capital. He said: "Our shareholders have not been clamouring for this buy-back. I have had no complaints from shareholders, and we have had their support when we needed it."
Sir Fred also moved to ease another central concern within the City - that he is perhaps a touch too fond of deal-doing - by re-stating that he had no intention of leading RBS into another expensive foreign foray, for the time being.
"Yes, there will be opportunities going forward, and some of those may involve acquisitions," he said. "But we have no plans for major acquisitions."
RBS has shelled out almost £35bn in a drive to become a heavyweight global bank, including the transformational takeover of a flabby NatWest in 2000 for £21bn and taking a 10 per cent stake in Bank of China in August 2005 for £920m. The City welcomed the return of capital and Sir Fred's pledge to sit on RBS's cash. The shares, which have lagged in the past year, jumped 50p to 1,909p, their highest since mid-2002.
James Eden, a UK banking analyst at Dresdner Kleinwort Wasserstein, said: "Thanks Fred, we love you. I was going to name my new baby Gemma, but I'm now thinking about Frederica. Fred is not a deal junkie. Fred is not a megalomaniac. £1bn proves he cares."
Mr Eden rates RBS as his top pick among European banks and told clients to buy the shares to 2,200p.
RBS's pre-tax profits for the year were a touch stronger than expected, rising 21 per cent to almost £8bn. At 41.8 per cent of income, costs remained steady. Performances were particularly muscular from corporate banking, headed by Johnny Cameron, and its Citizens lending business in the US. Some 42 per cent of RBS's profits are derived from overseas.
But like competitors, RBS is finding retail banking tough at home. Bad debts across the group grew by 7 per cent to £1.7bn, and Sir Fred remains cautious about unsecured lending. He said: "Things seem to be improving, although I don't think 2006 will be a bumper year in UK retail banking."Reuse content