Treasury guarantee paid off
RBS takes further step to resuming dividend payments
It has paid off the £1.193 billion final instalment on a Dividend Access Share to the Treasury which gave the government enhanced dividend rights. It is a big step towards ‘normalising’ RBS’s balance sheet.
Ross McEwan, RBS group chief executive, said: “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 £1.193 billion to finally retire the Dividend Access Share.
“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.”
The DAS was issued in 2009 when the Treasury provided £25.5 billion of equity capital to RBS in exchange for B shares.
RBS also entered into the Asset Protection Scheme and the Contingent Capital Facility. The DAS was created to provide enhanced dividend rights to the Treasury on the new capital support provided. RBS exited the APS in October 2012 and terminated the CCF in December 2013.
Under the DAS Retirement Agreement of 2014, RBS agreed to pay the Treasury an initial DAS dividend of £320 million which was paid in that year. A further £1.18 billion in DAS dividend to the Treasury (plus daily interest at a rate of 5% per annum from 1 January 2016) was required to retire the DAS.
This dividend payment will be reflected in the bank’s first quarter 2016 financial statements, reducing tangible net asset value per share by approximately 10p. The equivalent Common Equity Tier 1 impact as at FY 2015 would have been c.50bps.
On retirement, the DAS will be re-designated as a single B share which will be subsequently cancelled. Following the conversion in 2015 of the B shares held by the Treasury into ordinary shares, the retirement of the DAS will complete the normalisation of RBS’s capital structure.
Background to the DAS