RBS reveals bumper £1.7billion dividend windfall for shareholders

Royal Bank of Scotland has unveiled a bumper £1.7 billion dividend payout, delivering a welcome boost for shareholders including the British taxpayer.

The partially state-owned bank announced a special dividend of 12p per share alongside an ordinary interim payment of 2p per share this morning.

Approximately £1billion of the £1.7billion total will go into the Government coffers thanks to the stake in the bank taken as part of its financial crisis bailout.

The hefty payout has been facilitated by the bank’s highest half-year profits in more than a decade, with a 130 per cent jump to £2billion.

Meanwhile, operating pre-tax profits outstripped forecasts, rising 48 per cent to £2.7billion.

Shares in the bank have fallen 5.6 per cent to 204.8p following the update though.

The figures were boosted by the sale of its stake in Saudi bank Alawwal, which completed its merger with Saudi British Bank in June.

Attributable profit for the second quarter was up 35 per cent to £1.3billion. Costs were down by £173million, with a target in place for £300million savings by the end of the year.

Net lending was up 2.5 per cent, while the bank recorded £14.3billion in gross new mortgage lending.

No new provisions have been made for further PPI claims ahead of this month’s deadline.

Chief executive Ross McEwan said: ‘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.’

No announcements were made regarding the hunt for McEwan’s successor, who is leaving to become boss of National Australia Bank.

Russ Mould, investment director at AJ Bell commented:  ‘Despite all the excitement about Royal Bank of Scotland paying £1.7 billion in dividends to shareholders – including the Treasury which will get about £1 billion given it still holds a major stake in the company – the real story is that the bank is highly unlikely to meet its financial targets.

‘If you exclude the sale of a stake in Saudi Arabia’s Alawwal Bank then its return on tangible equity in the first half of the year was only 7.5 per cent. That’s some way short of the 12 per cent target for 2020.

‘Elements of the story are unchanged, namely that RBS is still suffering from margin pressure thanks to a price war in the mortgage market,’ he continued.

‘With the increasing prospect of a Brexit no-deal on the horizon, Royal Bank of Scotland looks to be in a difficult situation.’

‘And for investors holding the shares as a source of income, they will need to consider the risk of a volatile share price and the potential for capital losses. The market is certainly spooked by today’s announcement given how the shares have fallen.’

Metro Bank chairman Vernon Hill stands down as bank looks to settle ship

Metro Bank’s woes were laid bare today after the troubled high street lender posted a downbeat financial performance and called time on its colourful founder’s role as chairman.

The under-fire challenger bank reported a sharp drop in profits for the six months to 30 June as it counted the costs of a major balance sheet blunder which rocked investor and customer confidence.

Pre-tax profits hit £3.4m in the first half of 2019, plummeting from £20.8m a year earlier. Customers also withdrew £2bn of deposits.

Vernon Hill, (pictured) the 73-year-old American billionaire who founded the self-styled ‘dog-friendly high street bank’, also confirmed his plans last night to leave his role as chairman as part of a management shake-up.

The hunt for Hill’s successor begins amid a flurry of new appointments that the firm has made in recent days, as it looks to bolster its senior ranks in the wake of its recent crisis.

“Vernon’s concluded that with where we are with our national growth, and where we are with regards to the longevity of the organisation, that he’s stepping down,” chief executive Craig Donaldson told the Press Association.

“Vernon is the founder and the visionary. We’ve created 4,000 jobs because of his vision.”

This week’s reshuffle is the first since the firm worried the City in January by slashing its growth plans and revealing an accountancy error in which some loans had been classified as less risky than they were.

Metro Bank’s share price has crashed more than 75 per cent since the revelation, which prompted fears of a regulatory crackdown and wider questions over the lender’s business model.

“We’ve faced more challenges in the first half of this year than we’ve ever faced,” said Donaldson. He said Metro wanted to “draw a line” under events in May when intense speculation about the bank’s future led to £1.4bn of outflows.

After the exodus the lender asked investors to stump up £375m as part of an emergency cash call to shore up its finances.

The company’s share price edged down four per cent today as investor caution mounted in the hours ahead of the firm’s results, which were released after trading closed