RBS hands £1bn dividend to taxpayers after unveiling bumper profits

Bailed out bank delivers special dividend but warns Brexit will cause it to miss performance targets this year

Despite higher profits, RBS shares fell 4 per cent in early trading (Reuters)

Bailed out bank RBS delivered a rare £1bn windfall for taxpayers after announcing a special dividend on the back of surging profits, but warned uncertainty surrounding Brexit would cause it to miss profit targets this year.

The bank, which has been mired in a series of scandals going back more than a decade, will hand £1.7bn to shareholders including £1bn to the public purse by virtue of the Treasury’s majority stake.

On Friday, RBS announced half-year profits attributable to shareholders were up 130 per cent on the same period last year to £2bn, its best performance for more than ten years. Operating profit was up 48 per cent to £2.7bn. Profits were boosted by further cost-cutting and the sale of Saudi bank Alawwal.

The improved results allowed RBS to pay a special dividend of 12p per share along with an annual dividend of 2p per share.

Despite higher profits, RBS shares fell 4 per cent in early trading off the back of a warning that 2020 performance targets may not be met. RBS said that a tough economic outlook would mean less demand for loans, causing it to miss profit and costs targets this year.

Outgoing RBS chief executive Ross McEwan siad: “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, senior investment manager at Brewin Dolphin, said RBS was now a very different bank to the one bailed out by taxpayers for £45.5bn in 2008 and was now “on the path to redemtion”.

“While there are cautionary words around hitting some of it targets against the backdrop of Brexit, RBS appears to be in stronger shape,” Mr Brown said.

“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 fact that RBS is now profitable and finally beginning to pay money back to the public purse after ten years of losses totalling more than £130bn will again raise questions about the timing of the government’s plan to sell off its shares.

Last year former chancellor Philip Hammond faced criticism for offloading almost 8 per cent of the bank’s shares at a loss of around £2bn to taxpayers compared the bailout price.

RBS share price was 206p on Friday, less than half of the 502p per share the Treasury paid in 2008.