RBS delivers bigger than expected dividend but sounds cautious note
RBS announced a second special dividend but warned of tough times ahead as the interest rate curve shifts lower and due to Brexit, weighing on its shares.
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The majority state-owned lender said it would pay a special dividend of 12.0p, on top of the ordinary interim payout 2.0p.
UBS's Jason Napier had been anticipating a special payout of 5.0p and an ordinary interim dividend of 2.5p.
Nonetheless, in remarks to Bloomberg TV, the lender's finance chief, Katie Murray, said the less favourable environment would make it harder for the lender to hit its profitability targets and that management was focused on what it could control, namely on continuing to lend and keeping a lid on costs.
In its results statement, the lender said it was "very unlikely" it would hit its 2020 targets for return in tangible equity of more than 12.0% and cost:income ratio of 50.0% in light of "current market conditions, continued economic and political uncertainty and the contraction of the yield curve."
However, RBS did believe they were achievable in the medium term and said that they remained its strategic targets.
For the first half of the year, the lender posted an operating profit before tax of £2,694.0m, on the back of £1,681.0m in profits during the second quarter (UBS: £1,267.0m)
RBS's common equity Tier 1 capital buffers improved from 16.3% in the first quarter to 16.9% before taking into account dividend accruals.
On the basis of its own dividend forecasts, UBS had penciled in a CET1 ratio of 16.6%.
As of 0851 BST, shares in RBS were trading lower by 5.11% to 206.0p.
-- More to follow --