Royal Bank of Scotland returned bigger dividends to its shareholders than predicted last year as its pre-tax profits rose, but the bank was less optimistic in the face of Brexit for the year ahead.
In its final results published today (February 15) RBS reported its pre-tax profits for 2018 had risen to £3.4bn, up from £2.2bn in the previous year, driven by a drop in costs of £278m as the bank continued its transition to digitalised services.
As a result RBS, which is still majority-owned by the government, is expected to pay a higher dividend to its shareholders than predicted, proposing a final ordinary dividend of 3.5 pence per share and a 7.5 pence special dividend.
This was the first dividend paid by the bank in 10 years, with RBS reporting it now had shareholder approval to participate in a directed buyback if the government sought to dispose of a portion of its shares.
Despite last year's optimistic results, Ross McEwan, RBS's chief executive, warned the UK economy faced a heightened level of uncertainty against the backdrop of Britain's departure from the EU.
He said: "Our long-term target remains to reach a cost to income ratio of below 50 per cent, however we note that as an industry we are required to carry additional costs to deal with Brexit and the ongoing operational obligations of ring-fencing.
"Given the continued low rate environment and highly competitive mortgage market, coupled with the uncertainty in the economy, income remains under pressure.
"We continue to focus on cost reduction to ensure we are preparing our business for the future and to meet our customers and shareholders needs."
RBS said it had maintained a "prudent" approach to risk, with gross new mortgage lending at £30.4bn during 2018, down by 1.9 per cent on the previous year.
Its net interest margin - the difference between interest earned from mortgage loans and the amount paid out on deposits - fell by 15 basis points to 1.98 per cent, in part due to competitive pressures