• Bank may have to show regulators two years of profit: analysts
  • CEO has pledged to return capital by 2017 at the earliest

Royal Bank of Scotland Group Plc, Britain’s largest taxpayer-owned bank, is unlikely to pay a dividend before it can show regulators two years of profit, Berenberg said.

That means the Edinburgh-based lender probably won’t make payouts to investors until 2018 at the earliest, a year later than expected, James Chappell and Iro Papadopoulou wrote in a note to clients on Tuesday. The analysts, based in London, have a sell rating on the stock.

Chief Executive Officer Ross McEwan, 58, is divesting assets to focus on U.K. and Irish consumer and commercial lending, pledging to return excess capital generated to shareholders as early as the first quarter of 2017. A looming settlement with U.S. authorities over the bank’s handling of mortgage securities could overshadow his plan.

“We would be surprised if the regulator did allow the ‘excess’ capital to be returned before RBS had been profitable for two years,” the analysts wrote. “On our estimates this points to 2018 at the earliest. While the end point looks attractive, there is a lot that needs to be achieved.”

RBS needs to comfortably pass stress tests set by the Bank of England before the central bank’s Prudential Regulation Authority will allow the lender to make payouts to investors, RBS Chief Financial Officer Ewen Stevenson said on a call with analysts at the bank’s half-year earnings in July.

“We need to go through this year’s stress test round, another stress test round, which means we should be able to start to engage with the PRA, I think, in late 2016,” Stevenson said at the time.

The BOE is scheduled to publish the results on its examination into the financial health of British lenders in December.

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