RBS to pay first dividend in 10 years

Royal Bank of Scotland Group PLC (RBS.LN) said Friday that it will pay its first dividend in 10 years and is considering special distributions, after reporting first-half profit.

The majority state-owned U.K. lender said it intends to pay a 2.0 pence a share interim dividend, RBS’s first since its taxpayer-funded rescue in 2008.

RBS said its operating pretax profit came to 1.83 billion pounds ($2.38 billion) for the first half, down from GBP1.95 billion in the year-earlier half.

The operating profit figure included a GBP801 million litigation-and-conduct charge, to cover RBS’s settlement with the U.S. Department of Justice over the sale of mortgage-backed securities in the lead up to the 2008 financial crisis. This contributed to a 5.4% fall in net profit to GBP888 million.

RBS said the timing of its interim dividend will depend on the finalization of the U.S. settlement, but over time it expects to build to a regular dividend payout ratio of 40%. The lender said it will also consider special distributions, depending on regulatory approval, although it doesn’t expect any additional payouts until 2019.

RBS said the dividend is supported by its underlying profitability and continued reduction of risk-weighted assets, which generated 110 basis points of capital in the second quarter. At the end of the period, the bank’s common equity Tier 1 ratio, a key measure of capital strength, stood at 16.1%.

The bank reported a 3.1% drop in interim total income to GBP6.70 billion. Its net interest margin–the difference between what it collects on loans and pays out on deposits–dropped 3 basis points to 2.01% amid pressure from competition. The lender said its guidance remains unchanged from its 2017 results.

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