In order to serve the needs of businesses and households through the unprecedented situation presented by Covid-19, the Royal Bank of Scotland Group plc (LON:RBS) Board of Directors has decided to undertake no quarterly or interim dividend payments, accrual of dividends or share buybacks and defer decisions on any future shareholder distributions until the end of 2020.
In response to a formal request from the Prudential Regulatory Authority, the Board has also decided to cancel the final ordinary and special dividend payments in relation to the 2019 financial year (“2019 final dividends”) and not submit them for approval to the RBS AGM to be held on 29 April 2020.
RBS continues to maintain its robust capital and liquidity position and enters this period with more than sufficient capital to accommodate the combined simultaneous impact of severe UK and global recessions and a financial markets shock as demonstrated through our performance in recent Bank of England stress tests.
As a result of this Board action, the 2019 final dividends and an associated dividend-linked contribution to the main RBS UK pension scheme(1), are cancelled. These were reflected in the 31 December 2019 CET1 capital as foreseeable deductions, in particular:
· Ordinary dividend of 3p per share totalling £363m and equating to 20 bps of Q4’19 CET1;
· Special dividend of 5p per share totalling £605m and equating to 34 bps of Q4’19 CET1; and
· Dividend linked contribution of £500m pre-tax, £365m post-tax, and equating to 20 bps of Q4’19 CET1.
This Board action reduces the RBS CET1 capital deductions by £1,333m, equating to an improvement from the FY19 published 16.2% CET1 ratio of 74 bps.
For completeness, this has no impact on the payment of interest on outstanding preference shares or Alternative Tier 1 instruments (“AT1”) issued by RBS and its subsidiaries.
The Board remains committed to capital returns, will continue to review the situation and will look to resume distributions to ordinary shareholders in due course.
(1) – Under the terms of the agreement with its main UK pension scheme trustee in April 2018, RBS is committed to make contributions to that scheme from 2020 at a level matching shareholder distributions made during each year up to an annual maximum of £500 million and a cumulative total of £1.5 billion.
Royal Bank of Scotland Chief Executive Alison Rose said:
“RBS has a robust capital and liquidity position and we are focused on ensuring we support our customers and help them to navigate the immediate and longer-term challenges they are facing as a result of Covid-19.
“As we continue to build a purpose led bank we are committed to balancing the needs of all our stakeholders. Helping people, families and businesses who need our support is the right thing to do at this time of significant uncertainty.
“The Board remains committed to capital returns, will continue to review the situation and will look to resume distributions to ordinary shareholders in due course.”
