RBS pays off government golden share to enable dividend payments

Royal Bank of Scotland will be able to issue shareholders with dividends after it paid off the final 'golden share' owed to the UK government.

RBS revealed it will on Tuesday pay off a £1.193bn 'dividend access share' (DAS) to the Treasury, the arrangement that put the government at the front of the queue to receive dividend payments from RBS, which was baked into the bank’s bailout to afford some protection for the taxpayer. The state still owns 72.6% of the bank.

The DAS has prevented the bank from returning money to investors and this payment, which will reduce tangible net asset value per share by approximately 10p, paves the way for it to pay dividends or buy back shares.

But dividends for ordinary shareholders are still some way off, with RBS first dividend payment since 2008 having been pushed back to 2017 at the earliest.

"On the back of progress we have made in strengthening the bank's balance sheet in recent years, I am pleased that we are today able to repay the UK government £1.193bn to finally retire the DAS," said chief executive Ross McEwan.

"This is another important milestone in our plan to resume capital distributions to our shareholders, and represents one less hurdle in our path to build the number one bank for customer service, trust and advocacy".

Analyst Laith Khalaf at Hargreaves Lansdown said: "Today’s payment to the Treasury represents a step in the rehabilitation of RBS into a normal bank, but there’s still an awfully long way to go.

"Dividends have been pushed back until the full extent of US conduct costs is out in the open, and the share price is still languishing well below what the government paid for the bank, which means it’s going to be some considerable time before the bank is weaned off taxpayer support."