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RBS to Repay Last of Government Aid, Reinstate Dividends

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Source: Bloomberg

Royal Bank of Scotland Group Plc, Britain’s biggest publicly-owned lender, said it will pay back the last of its emergency aid from the UK government and will resume paying dividends on preference shares.

Operating profit rose 4 per cent in the first quarter to GBP1.18 billion (US$1.91 billion) from GBP1.13 billion a year earlier, the Edinburgh-based bank said in a statement Friday. Analysts predicted a profit of GBP917 million, according to the median estimate of six surveyed by Bloomberg.

RBS will by the end of next month have repaid GBP164 billion of emergency aid it received from the UK and US governments as it received the biggest bank bailout in history in 2008. It still leaves the British taxpayer with an 82-per cent stake in the bank. The stock is trading for half the price the government paid.

“RBS has made enormous progress and they are delivering on what they said they would,” said Ian Gordon, an analyst at Investec Securities Ltd in London. “The balance sheet metrics are very impressive.”

The shares rose 1.1 per cent to 24.81 pence by 8:02 am in London, giving the bank a market value of GBP27.9 billion. After sinking 48 per cent last year, the stock has rebounded 23 per cent this year. The government bought shares at an average price of 50.2 pence a share.

Chief Executive Officer Stephen Hester said Friday the government has no desire to sell shares at Friday’s price.

“While I think everyone is focused on that being the desired end game, I’m not aware of anything imminent on that front,” Hester, 51, told reporters on a conference call Friday.

RBS said it will resume discretionary dividend payments to preference share holders after a European Union ban expired at the end of last month. The plan will cost GBP350 million.

It also said it will repay the last of the GBP75-billion debt provided by the UK government’s Credit Guarantee Scheme funding.