Royal Bank of Scotland Group (LON:RBS) could use up to £4 billion of surplus capital to pay out a special one-off dividend to shareholders, the bailed-out lender’s chairman Sir Howard Davies has told The Times. The news comes after the bank, rescued by the UK taxpayer during the financial crisis, restored its payout to shareholders earlier this year.
RBS’ share price has jumped in London in today’s session, having added 1.67 percent to 248.90p as of 10:19 BST. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.16 percent lower at 7,301.35 points.
RBS signals special dividend
RBS’ chairman Sir Howard Davis told The Times yesterday that while his preferred choice was to use the spare cash to buy shares in the bailed-out lender from the government, the dividend was an option if shareholders wanted it. A special dividend could be used to pay about 33p a share to investors.
“If there are a lot of shareholders pressing for a special dividend, that is something we would consider,” he told the newspaper. His soundings of large institutional investors, however, suggested that the majority favoured a buyback, while many private shareholders would prefer a cash dividend.
The Times quoted Laith Khalaf, a senior analyst at Hargreaves Lansdown, which serves a million small investors, as commenting that while a buyback should deliver similar value to a dividend, “private RBS shareholders would probably prefer cold, hard cash upfront, particularly after a decade of deprivation”.
Goldman Sachs upbeat on group
In a separate development, Goldman Sachs lifted its stance on RBS to ‘buy’ yesterday. Proactive Investors quoted the analysts as arguing that the group is well positioned to weather the increasingly competitive UK mortgage market.