Best known as Britain's biggest financial crisis failure, some investors and analysts view majority state-owned Royal Bank of Scotland as the lender likely to emerge strongest from the coronavirus downturn.
LONDON - Best known as Britain’s biggest financial crisis failure, some investors and analysts view majority state-owned Royal Bank of Scotland as the lender likely to emerge strongest from the coronavirus downturn.
Now investors are betting this capital cushion, which will help it absorb loan losses resulting from the economic crunch, will help RBS gain greater market share and potentially restore a dividend ahead of rivals. RBS was quicker than other banks to lend billions of pounds under the British government’s coronavirus relief schemes, although executives say it was not under pressure to do so.
Although RBS Chief Executive Alison Rose has said it is only lending to existing customers via the government’s relief schemes, analysts say any expansion risks greater losses as many of the loans are 80% not 100% state guaranteed. And while a year-end dividend is unlikely given the economic downturn and political pressure on banks and other companies not to make payouts to shareholders, John Teahan, portfolio manager at RWC Equity Income, thinks RBS will reward their patience.
RBS secured shareholder approval for directed buybacks of the state’s shares last year, which would complement any purchases of its own stock in the open market, should the government decide to sell down in this way.
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