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imageEDINBURGH: Royal Bank of Scotland expects a substantial increase in its capital as a result of disposals over the coming years and intends to return excess capital to shareholders, Chief Executive Ross McEwan said.

The bank, which is 78-percent owned by the government, said in February it would shrink its investment banking operations drastically, pulling out of 25 countries across Europe, Asia and the Middle East, to help it refocus on lending in Britain. It is also selling its US bank Citizens.

"As we reduce risk, and make expected divestments over the coming years, we anticipate a substantial increase in our capital as a result. Subject to approval, we intend to return any surplus capital to our shareholders," McEwan told the bank's annual meeting on Tuesday.

Paying a dividend or buying back shares would make the bank more attractive to shareholders and help the government dispose of its stake.

Prior to the meeting, Chairman Philip Hampton said it would take the government several years to sell its 78 percent shareholding in the bailed-out British lender.

British finance minister George Osborne has said the government will start selling its shares in the coming months. The bank was bailed out at a cost of 45.8 billion pounds ($72 billion) to taxpayers during the 2007-09 financial crisis.

"I've long thought the process should have started," Hampton, who will leave the bank this year after six and a half years, told reporters before the bank's annual meeting. "It's a lot of stock to shift and I think it will take several years," he said.

Copyright Reuters, 2015

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