15th Feb 2019 07:26
LONDON (Alliance News) - Royal Bank of Scotland Group PLC on Friday rewarded shareholders with a special dividend, as profit for 2018 beat the market's expectations.
RBS will pay a 7.5 pence per share special dividend for 2018, and will return a final dividend of 3.5p. Combined with the bank's 2.0p interim payout, the year's total is 13p.
The 2018 interim dividend was RBS's first in ten years, after being bailed out by the UK government during the financial crisis.
The bank's attributable profit for 2018 came in at GBP1.62 billion, compared to consensus of GBP1.42 billion. In 2017, when RBS reported its first profit in a decade, the figure was GBP752 million.
Net interest income for 2018 was GBP8.66 billion, against GBP8.65 billion consensus and GBP8.99 billion a year prior. Total income was GBP13.40 billion, compared to 2017's GBP13.13 billion and the market expectation of GBP13.38 billion.
Pretax operating profit was GBP3.36 billion, beating GBP3.16 billion consensus and well above the GBP2.24 billion in 2017.
RBS's common equity tier 1 ratio, or CET1, at the end of 2018 was 16.2%. Consensus had seen it at 16.5%. At the end of 2017, it had been 15.9%.
RBS said it is targeting a CET1 ratio of around 14% by the end of 2021.
RBS's net interest margin at the end of 2018 was 1.98%, from 1.93% at the end of the third quarter and 2.13% at the end of 2017.
Looking ahead, RBS said it expects a further GBP1.5 billion of costs in 2019 to be incurred to implement cost-savings plans, on top of the GBP1 billion already booked for this in 2018.
RBS is confident on its return on tangible equity target for 2018 of over 12%, but now thinks its cost-to- income ratio of below 50% is "increasingly challenging".
Impairments are set to rise in 2019, the FTSE 100 bank continued, but remain below its through-the-cycle loss ratio assumption.
"In 2019, we will focus forward, into a rapidly changing market. We have set annual goals for 2019 based around our five priorities in order to keep up momentum on the delivery of our strategic plan," said Chief Executive Ross McEwan.
"There are two areas in particular that we need to focus on - customer experience and simplifying the bank. This year we aim to spend GBP1 billion on upgrading legacy infrastructure, improving systems, processes and delivering new innovations which will improve our customers' experience. We will simplify the bank further in 2019, given this we have set a operating cost reduction target of GBP300 million for 2019, and continue to strive for a sub 50% cost to income ratio.
"We have made good progress on making RBS a much simpler, safer and more customer focused bank. From a position of capital strength, we will aim to improve returns for you, our shareholders," McEwan added.
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