I must retract on my statement yesterday that the divi most certainly will be paid this quarter.
I am now a bit uncertain (not enough to lighten up shares). The distributable profits calculation remains elusive to me (and to many, I suspect). A key element is whether and how to include the RBS write-down of Goodwill. I believe it may enter the calculation only partially (that it is amortizied over time) and not fully. This is supported in part by the company statement that the writedown only impacts the balance sheet -- but I need to review the recent release and the press conference transcripts again, perhaps in the next day or two.
Notably, the company was very explicit that the divi on common is intended to be dropped for all of 2009, and there was no mention of the divi on preferred being impacted. I will say that if it was clear that the preferred divi would be impacted that RBS would have a legal obligation to have noted that in its release.
Another angle on this....... I'm very confident that the next quarter dividend WILL be paid.. If you read the "offering" on the conversion of Gov. Preference shares to common. It states that they will pay accrued interest upto the conversion date (March 31st?). So it is implied they will pay the Gov Dividend and the other Preferred shares are Pari-Pasu, so if they announce a suspension of dividneds before the Gov. Preferred conversion, they they must also stop the Gov. Dividend - which they have expressely stated they plan to pay.....
I'm VERY confident that at least the next dividend (Payable 3/31) WILL be paid....... Beyond that we can speculate all we wish....
Just wish I would have bought more when the prices we trashed last week. Only picked up a few thousand of the "H".
Good luck to all...... Thanks for all the intellegent posts.
Page 8 of this transcript, on the coupons for Tier 1 capital (this includes preferred):
1. the dividend is up to the Board, not us, and will be decide at the normal time;
2. And, my interpretation of the follow up. They indicate that they place a great deal of emphasis on equity as the principal place of loss absorption. The following question response says that they want also to continue to operate in normal ways as it relates to our behaviour in the markets. Well "normal ways" means paying the dividends.
So, I conclude:
1. Apparently, they have no accounting evidence to-date suggesting the divis cannot be paid;
2. The Board will make the decision, as always, and we are not going to give any indication or our own judgment on the matter;
3. My judgment from the above -- paying the divi is operating in normal ways.
Someone on this board corrected me several days ago as to just what is retained earnings on the RBS balance sheet, no offense taken. There is an additional issue involving U.K. accounting that I don't have a clue as to the answer. That is, where is the charge recorded i.e., retained earnings, minority equity interests or some other equity account other than retained earnings. Their rules differ from U.S. GAAP and I just don't know.
In the US write off of goodwill (impairment) is charged to retained earnings.
But RBS has on their 2007 balance sheet 38 billion in minority interests equity. In 2007 they recorded 23 billion in intangible assets relating to the purchase of ABN.
Thus it may very well be that any goodwill write off may go anainst the minority interst equity, not retained earnings.
This would mean that there is still positive retained earnings and justification for paying the preferred dividends.
Well, generally I do understand that "distributable profits" (UK) are pretty much like realized earnings (USA). And, are retained earnings (prior period realized earnings accumulated) and current period realized earnings.
the construct of current period realizes earnings is a net of profits and losses components, but this can get interesting.
Based on my last post, on the transcripts, I am done looking at this issue and am comfortable with my preferreds -- and that the divi will be paid.