RBS to pay $2.5 billion to end UK government's dividend priority
By Matt Scuffham
LONDON (Reuters) - Royal Bank of Scotland (RBS.L: Quote) has agreed to pay 1.5 billion pounds ($2.5 billion) to cancel an arrangement that gives the government priority over dividends, clearing an obstacle to the lender's eventual privatization.
The agreement between part-nationalized RBS and Britain's finance ministry to cancel the dividend access share (DAS), which gives the state priority over dividend payments and makes the stock less attractive to private investors, was approved by European regulators on Wednesday.
It had been put in place after Britain pumped 45.8 billion pounds into RBS during the 2008/9 financial crisis, leaving the government with an 81 percent shareholding.
"This is another important step on the road to a more resilient banking system and in dealing with the problems of the past to get taxpayers' money back," Britain's finance minister George Osborne said in a statement.
The figure of 1.5 billion pounds was in line with what UK Financial Investments, which manages the government's stake in RBS, had previously indicated the agreement was worth.
RBS said the cancellation of DAS would enable it to state more clearly its future dividend policy to existing and potential investors. But it said it had no intention to resume dividends in the short term.
The agreement requires approval by RBS's minority shareholders at the bank's annual meeting which is expected to take place in June.
"Today's agreement is a vote of confidence in the progress we have made in rebuilding RBS and in our plan for the bank's future," Chief Executive Ross McEwan said in a statement. "We now need to get on with building an RBS that can earn the trust of our customers and help change UK banking for the better." Continued...