RBS share price: Weak EU stress test result to delay dividend further

on Aug 1, 2016
Updated: Oct 21, 2019

Royal Bank of Scotland Group’s (LON:RBS) weak performance in European stress tests is likely to delay further the lender’s chances of paying dividends, The Times has reported, quoting analysts. The EU stress test results come ahead of the bailed-out bank’s update on Friday when RBS is expected to unveil a half-year loss.

RBS’ share price has been steady in London this morning, having inched 0.10 percent higher to 192.60p as of 08:22 BST. The shares are slightly underperforming the broader London market, with the benchmark FTSE 100 index having gained 0.62 percent to stand at 6,765.85 points. The group’s shares have lost more than 43 percent of their value over the past year, and are down by more than 36 percent in the year-to-date.

The results of the European Banking Authority’s stress tests, released on Friday, showed that under the scenario of a three-year downturn, RBS could lose 7.5 percentage points of capital, marking the third-biggest fall of the 51 banks tested. The Times quoted analysts at Bernstein as commenting that the result “puts to bed any dividend hopes for [RBS] till at least the end of next year”.
The FTSE 100 group’s finance chief meanwhile commented that the stress test results demonstrated RBS’ “continued progress towards transforming the balance sheet to being safe and sustainable”.
“We are confident that in delivering our strategy, we will transform RBS into a low risk, resilient bank,” he added in a statement this morning.
The Times further noted that the bailed-out lender is expected to unveil a loss of several hundred millions for the second quarter, weighed down by restructuring and misconduct costs, when it updates investors on its half-year performance on Friday. The bank is also likely to warn about the hit it would take from an expected quarter-point cut in interest rates on Thursday, the day before the results.
As of 08:51 BST, Monday, 01 August, Royal Bank of Scotland Group share price is 191.30p.