Despite Royal Bank of Scotland (RBS) seeing profits fall in the first half of 2018, the bank has announced that it will be paying 2p per share as an interim dividend as soon as its $4.9bn (£3.8bn) settlement with the US Department of Justice (DoJ) over mortgage-backed securities was completed.
In H1 2018, the banks attributable profit was £888m, compared with £939m in 2017.
RBS booked a £1bn charge to deal with the settlement with US regulators, which was agreed in May, in relation to the banks mis-selling of the securities leading up to the financial crisis.
Market analyst The Share Centre has recommended RBS as a ‘hold’ for investors seeking capital growth and willing to accept a medium level of risk.
The Share Centre investment research analyst Helal Miah said: “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 2p 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.
“The reinstatement of the dividend will not only give existing shareholders some confidence but also to the large number of fund managers who could not invest in them previously due to the lack of any income and it will make the governments task of offloading its roughly 62% holding onto the market a little easier.
“However, this does not mean it is going to be all plain sailing for RBS from here, the group still has many legacy issues to overcome and restructuring is still ongoing including many assets still left to dispose. The dividend hike for the time being means that the income is still very modest and we therefore feel that it is a share for investors seeking capital growth and a longer term recovery in the share price for those willing to accept a medium level of risk.”
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