RBS kicks dividends into long grass but doubles boss's money

Shareholders told they’ll have to wait longer as bank reports its eighth straight loss

James Moore,Nick Goodway
Saturday 27 February 2016 01:55
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RBS boss on bank's future

Royal Bank of Scotland capped a bad week for the banking industry by warning investors of further delays in a resumption of dividends, even as it doubled the pay of its boss Ross McEwan.

With its turnaround apparently as elusive as ever, the bank said a rash of US legal cases, and delays in spinning off the small business bank William & Glyn, mean there will be no shareholder payments until after the first quarter of 2017.

But that didn’t stop it handing Mr McEwan £3.8m, the highest pay for a boss of RBS since its taxpayer bailout during the financial crisis in 2008.

Analysts warned that the dividend gloom will make it tougher for the Chancellor to offload more of the taxpayer’s 73 per cent stake in the bank, which has racked up £50bn in losses since it went cap in hand to the Government.

The shares did nothing to help, finishing the day down 7 per cent at 226.6p as RBS reported an annual post-tax loss of £2bn, its eighth in a row, against £3.5bn in 2014.

The finance director Ewen Stevenson insisted that the dividend delay “does not impact the long-term equity story on the bank, which means the Treasury still has the ability to sell stock”.

But with the shares in a trough, any sale would require the Treasury to do so at a huge loss. They need to be at 500p for it to make money on the bailout.

Shailesh Raikundlia, an analyst at Haitong Research, said: “Overall, the results are broadly in line with the guidance given in January, with capital being better. But the delay in capital return plans will probably be taken negatively.”

Ian Gordon at Investec said he still saw scope for a share buyback in 2017, though he admitted that “it remains a very long slog ahead”. Meanwhile the spreadbetting outfit IG described the bank as “friendless in the market”.

RBS took a £3.5bn charge for litigation and mis-selling and £2.9bn for restructuring. Even its operating profits – which banks like people to look at because they exclude “one off” charges – fell from £6bn to £4.4bn.

Mr McEwan said that while the 2015 results were “noisier” than he would have liked, the bank had made progress in taking out costs and improving its capital position.

“We ended the year a simpler, stronger bank with a business anchored squarely in the UK and Ireland, focused on retail and commercial markets,” he said.

A total of 121 people were paid more than €1m (£790,000) at RBS last year. The overall bonus pool came in at £373m, down 11 per cent, while the top eight executives beneath board level shared £13m. Its chairman, Sir Howard Davies, defended remuneration at the bank, saying: “They are paid appropriately in relation to their peers and we are certainly not paying as much as elsewhere.”

Towards the end of next month, RBS expects to hear the result of the Financial Conduct Authority’s probe into claims that it forced small business borrowers into its turnaround division in order to extract higher fees and interest out of them. That could mean another large fine and compensation claims.

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