RBS share price: Meaningful dividends still seen “a long way off”

on Mar 25, 2016
Updated: Oct 21, 2019

Meaningful dividends at Royal Bank of Scotland Group (LON:RBS) are still a long way away, Morningstar has said. The comments came as the analysts welcomed the repayment of the Treasury’s dividend access share (DAS) earlier this week which paves the way for payouts to retail shareholders in the bailed-out lender.

RBS’ share price fell 2.02 percent in yesterday’s session to close at 223.60p, slightly underperforming the broader London market. The shares have lost over a third of their value over the past year.
Analysts at Morningstar said in a note this week that while they were “pleased” with the RBS’ repayment of the DAS to the UK government, they still thought “meaningful dividends are a long way off”.

“We think that ordinary dividends are not likely until RBS’ legal woes are behind it, and the timing of that is largely in the hands of US regulators,” Morningstar’s Erin Davis said, adding that the analysts maintained their position that the FTSE 100 group would not move to return capital to shareholders until its mortgage litigation in the US was largely resolved, a position reinforced by management’s comments in the past.
RBS, whose performance continues to be plagued by costs for past misconduct, warned alongside its full-year results that that outstanding issues such as a potential settlement with the US over sales of mortgage-backed securities, and challenges related to the separation of its Williams and Glyn business meant that the bank now considered it “more likely that capital distributions will resume later than Q1 2017”. Morningstar said that it was pencilling in dividends to resume in the second half of next year.
Keefe, Bruyette & Woods meanwhile reiterated their ‘market perform’ rating on RBS yesterday, with a price target of 280p. Nomura, which is also ‘neutral’ on the bailed-out lender, hiked its valuation on the stock from 275p to 280p last week.
As of 14:06 GMT, Friday, 25 March, Royal Bank of Scotland Group share price is 223.60p.