RBS to Pay Back Governement Aid, Issue Dividend as Earnings Increase
Royal Bank of Scotland (NYSE: RBS) is taking steps out of government ownership, the latest being a statement that the company will repay the last of its aid from U.K. taxpayers by the end of the month. “Next week the bank will repay the last of the UK Government-backed funding support we received during the crisis. We will also recommence paying dividends/coupons on hybrid capital,” Chief Executive Stephen Heater said in a press release issued this morning. “These are important recovery milestones.” The announcement comes on the heels of increased earnings for the first quarter of 2012. Operating profit increased 4% to 1.18 billion pounds. Analysts surveyed by Bloomberg predicted a profit of 917 million pounds. The bank lost 144 million pounds in the fourth quarter of 2011. During the past three years RBS has paid back 75 billion pounds, money received from the government to increase liquidity during the U.S. financial crisis. The bank will not be completely government-ownership free. The UK government purchased an 82 percent stake in the company for about $45.5 billion pounds, or 50.2 pence a share. The stock is trading at about half that, discouraging the government's sale of its portion. RBS also declared a dividend on preferred shares, 1cent for dollar-valued shares and 0.01 euros for euro-based shares, for the first time in two years. The bank will likely have to raise holdings in accordance with Basel Committee on Banking Supervision rules before it will pay dividends to holders of non-premium stock. RBS's loan-to-deposit ratio, an indicator of liquidity, continued to show increased liquidity at the bank. It was 106% in the quarter, down from 116% a year earlier. Losses from writing down over-valued asses were 1.31 billion pounds, down one third from a year earlier as bad debt decreased, especially in UK retail. Retail and commercial lending posted a return on investment of 13%, excluding Ulsher Bank, in the quarter and the markets business earned 21% on investments. The bank continues to extend new loans to UK businesses, with 14.3 billion pounds loaned in the first quarter, 18% higher than a year earlier.
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