Move towards private ownership
RBS secures investor backing to buy shares from Treasury
The resolution, put to a general meeting in Edinburgh, required 75% of votes cast to be in favour. In the event it received 98.7%.
The Government had confirmed that it would not be voting its shares, but the buy back will not be allowed without the express agreement of the Treasury and regulatory approval from the PRA.
Chairman Howard Davies told a general meeting of shareholders at RBS headquarters in Edinburgh that at the end of the third quarter of 2018, the bank had a Common Equity Tier One capital ratio – a measure of the strength of its reserves – of 16.7%.This is above its medium term target of more than 13%.
“This is a result of building our capital reserves at a time when the bank was facing a number of highly uncertain legacy issues and restructuring costs. With those now largely resolved, its intention, over time, is to return the excess capital to our shareholders.”
Last year saw the bank report a bottom line profit and pay a dividend for the first time in 10 years. It also achieved a clear pass in the 2018 PRA stress test.
Sir Howard, pictured, told shareholders: “Those were important moments in the recovery of the bank and have allowed us to start thinking about how to distribute our excess capital. It is important to note however that, at present, we believe it is prudent to maintain capital somewhat above our target as we manage our way through a number of issues, including Brexit and various regulatory changes to the way the bank must account for its capital.”
Explaining the reason for the shares acquisition, he said: “A directed buy back is one way in which we can return excess capital to shareholders. The board strongly believes that buying back Government shares would be a positive use of this capital, bringing benefits to the bank and its shareholders by helping to facilitate its return to private ownership. We have consulted a range of large investors who are also highly supportive of this course of action.”
In June last year the Government undertook a further sell down of its majority stake in the bank, selling 925 million shares, raising total proceeds of £2.5 billion and reducing its stake to 62.3%. In addition, the Chancellor said in the Autumn Budget statement that the Government plans fully to exit its ownership of RBS by 2024.
“The timing of any future share sales is highly uncertain and entirely in the hands of the Treasury,” said Sir Howard.
The bank is limited to buying back a maximum of 4.99% of the ordinary share capital from the Treasury in any one year. At current market prices, that would reduce the bank’s CET1 ratio by 70 basis points.