INVESTORS have told the boss of Royal Bank of Scotland that the sale of the UK Government’s majority stake is the single most important milestone which must be reached before they would consider upping their investment in the institution, once it reaches a settlement in the US over its mis-selling of toxic mortgages.

The message was delivered to chief executive Ross McEwan at the Morgan Stanley Financials Conference in London, as he underlined the bank’s hopes of reaching a settlement with the US Department of Justice (DoJ) this year.

Mr McEwan said the settlement, which analysts expect will cost the bank several billion pounds, is the last major legacy issue to be overcome before the institution can resume dividend payments and return capital to investors via a share buyback. He had hoped a settlement would have been reached before the end of last year.

Conference delegates were given five scenarios and asked what they regarded to be the most important in terms of upping their investments in the bank, once the US settlement is out of the way. The five factors were: maintaining share wins in mortgage and SME lending; achieving a 50 per cent cost income ratio target in 2020; normalisation of its dividend policy; capital generation and share buy-back; and the road map to the exit of the Government stake. The final option received the most votes, but Mr McEwan said a sell-off will be “problematic” until the bank settles with the DoJ. Asked whether an agreement was “near”, he said: “I’ve got the timing of this completely wrong for the last 15 months, so I’m not going to predict it. All I’d say is that it will hopefully be in 2018.” He added: “That is the thing between us and returning capital.”