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RBS profits nearly wiped out on USA fine

06 August 2018

The bank said it envisaged share buybacks and ramping up the dividend to a 40% payout ratio, subject.

RBS announced in a statement this morning that it meant to declare an interim dividend of 2p per ordinary share, with the move subject to the timing of finalisation of the previously announced civil settlement in principle with the US Department of Justice over mis-sold mortgage-backed securities in the run-up to the financial crisis.

The interim dividend is subject to the bank finalising the penalty with the US Department of Justice.

After June's £2.5bn share sale, the government owns 62.4% of RBS.

RBS is now around 62% owned by the British taxpayer, down from more than 70% earlier in the year.

First-half operating profit fell 6.4% to £1.83bn and included a halving of second-quarter operating profit to £613m on-year. But since the fine was much lower than expectations of up to US$12bn, RBS released £241mln of the provision it set aside for litigation.

She pointed to tough competition in products like mortgages, which had shrunk the bank's net interest margin - an indicator of bank profitability - and said time will tell whether years of hefty cuts have left RBS less able to compete with its peers. They declined by 3.6% versus the same period of the previous year.

RBS also reported a Common Equity Tier 1 (CET1) ratio of 16.1% during the period, while risk-weighted assets decreased by £3.9 billion during the second quarter.

It comes as RBS reported a first-half attributable profit of £888m - down nine per cent on same period a year ago, largely down to the £1bn charge related to DoJ settlement, which was announced in May.

Richard J Hunter, head of markets at interactive Investor commented: "RBS continues to take small steps, rather than large strides, but even so is demonstrating something of a return to health".

Last month, the government lost £2.1 billion after selling a tranche of RBS shares at 271p each, nearly half the 502p a share it paid for them in 2008.

"The most important sign of an increased health of the bank came in the form of the announcement of the first interim dividend since the financial crisis of 2 pence per share, this - combined with the better-than-expected profit figures - has contributed to the share price rising in early morning trading by a few percentage points".

RBS profits nearly wiped out on USA fine