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Royal Bank of Scotland (RBS) to Pay Special One-off Dividend

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Bringing in good news for shareholders, Britain-based Royal Bank of Scotland (RBS - Free Report) is expected to pay a special one-off dividend to shareholders using 4 billion pounds ($5.2 billion) of its surplus capital. The news was reported by the Times, following an interview with the bank's chairman Howard Davies.

Per the source, Davies has the preference of using the idle cash for buying RBS shares from the government, however, the special dividend payment of 33 pence per share can be opted on shareholders’ demand.

"If there are a lot of shareholders pressing for a special dividend, that is something we would consider," the Times quoted Davies as saying.

No comments from RBS were recorded.

Notably, the British government currently has a 62.4% stake in RBS which was taken up by paying 45.5 billion pound ($59.1 billion) as state bailout during the financial crisis.

In August, RBS announced an interim dividend of 2 pence per share. However, the dividend will be paid on final settlement worth $4.9 billion of the litigation case related to the sale of mortgage-backed securities with the U.S. Department of Justice (DOJ).

RBS set aside additional provision worth £1,040 million in the June-end quarter for meeting litigation settlements. Though the agreement initiated in May, the settlement’s awaited finalization has restricted RBS’ return to dividends.

Our Viewpoint

We expect RBS’ diversified business model and sound financial position to be conducive to overall growth in the near term. Moreover, resumption of dividend payment and special dividend announcement reflects its improving financial position and is expected to act as a tailwind. Though heightened competition, volatility in the global economy and litigation costs remain plausible concerns, the bank’s ongoing restructuring measures will likely help battle some of these challenges.

Shares of RBS have declined around 8.2% on the NYSE over the past three months compared with the fall of 4.7% recorded by the industry. RBS currently carries a Zacks Rank #4 (Sell).



 

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The Bank of N.T. Butterfield & Son Limited (NTB - Free Report) carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for the company jumped nearly 1% for the current year, in the last 90 days. Its share price has gained around 6.5% in the past three months.

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