Royal Bank of Scotland is set to book its second consecutive year of annual profits next week, providing further impetus for the Government to continue selling down its stake in the lender.
A consensus of City analysts is forecasting the bank will see bottom line profits nearly double from £752 million last year to £1.4 billion when it reports on Friday.
It will mark the bank’s second year in the black following a decade-long run of stinging losses, during a period marred by crisis-era legacy and conduct charges.
However, under chief executive Ross McEwan’s stewardship, the bank drew a line under the last of the major misconduct settlements in August, reaching a 4.9 billion US dollar (£3.7 billion) agreement with US authorities over alleged mis-selling of residential mortgage-backed securities.
Moreover, the 62.4%-taxpayer owned lender has recently gained shareholder approval that allows it to buy back up to £1.5 billion worth of shares from the Treasury.
The move, which aims to speed up its privatisation and deploy excess capital, permits RBS to purchase up to 4.99% of the Government’s stake in any one year.
The bank’s shares have rallied since December and Ian Gordon, analyst at Investec, believes another upward spurt could see the Treasury offload another tranche.
He said: “RBS shares have already rallied by 23% over the past two months. It’s (almost) time for the UK Government to leave.
“Another circa 10% or so and we suspect that it will become a willing seller again.”
Chancellor Philip Hammond said in his Autumn Statement that the Government plans to dispose of its stake in full by 2024, but Investec is pencilling in an exit by 2023.
This is based on the assumption of directed share buybacks of 4.99% per year, supplemented by yearly market placings by the Government of £3 billion.
Mr Gordon also believes that RBS will declare a 10p special dividend alongside its results.
RBS has been majority taxpayer owned since 2008, when it received a £45 billion bailout at the height of the financial crisis.
The Treasury plans to sell its stake by 2024 but is expected to lose billions in the process.
RBS was bailed out at 502p per share but its stock is trading at around 240p today.
Another area of focus at the results will be Brexit.
RBS shares were dented in October after third quarter result showed a £100 million charge to reflect the “more uncertain economic outlook” in Britain ahead of March 29.
Observers will be listening intently to Mr McEwan’s words for any further warning signals.
Analysts at The Share Centre said: “After a poor 2018 the share price has regained some upward momentum this year.
“Investors will be hoping for better news on revenues and impairments over the final quarter.
“Other areas of interest will be the group’s outlook, especially relating to Brexit, future dividend policy and any further news on buying back shares from the Government.”