Analysts believe Royal Bank of Scotland’s (RBS) u-turn over the sale of Williams & Glyn (W&G) could accelerate the return of dividends by the bank. Long-suffering RBS shareholders have not received a dividend since the business was rescued by a government bail-out in 2008, during the global financial crisis.

The market mood is changing after RBS unveiled plans to abandon the sale of small business lender W&G after a seven-year struggle to find a buyer. The sale was part of European Union state aid demands, but instead RBS hopes to set-up a £750m fund aimed at supporting challenger banks to meet the funding needs of smaller businesses. That sparked a 6% rally in the share price to 256.3p.

‘The State Aid task and the outstanding RMBS litigation issue are, in our view, the two remaining impediments to restarting dividends,’ say UBS analysts Jason Napier and Ivan Jevremovic. The litigation refers to several residential mortgage-backed securities lawsuits being fought in the US courts over alleged mis-selling.

Consensus of the 23 analysts that publish forecasts for RBS suggests that a 1.15p per share dividend could be paid this year to 31 December 2017.

The balance of expectations shifts markedly in 2018, with consensus pitched at a 10.4p per share payout, implying an income yield of 4.1%. (SF)

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