Royal Bank of Scotland has seen bottom-line profits drop after being hit by a major settlement with US authorities.

But the lender announced its first dividend in 10 years as it starts to put some of its legacy issues to rest.

The high street bank – which is still around 62% owned by the taxpayer – reported £888 million in attributable bottom-line profits for the half year to June 30, down from £939 million a year earlier.

It was hit by £801 million in litigation and conduct costs over the period, helping to cover the 4.9 billion US dollar (£3.7 billion) settlement reached with the US Department of Justice (DoJ) earlier this year over claims that it mis-sold mortgages in the run-up to the financial crisis.

Total income over the period dropped from £6.9 billion to £6.7 billion.

The settlement with the the DoJ has opened the door for a shareholder payout, with RBS announcing its first dividend in a decade.

The interim dividend will be 2p per share, though the timing of the payout is subject to the finalisation of its US settlement.

Royal Bank of Scotland chief executive Ross McEwan (Andrew Milligan/PA)RBS chief executive Ross McEwan said he was pleased with progress so far in 2018 (Andrew Milligan/PA)

RBS chief executive Ross McEwan said:  “We are pleased with the progress we’ve made in the first half of 2018 and see these as a good set of results in a more uncertain and highly-competitive environment.

“We are also pleased to announce an intention to pay our first dividend in 10 years, subject to a final settlement with the DoJ.

“Our sector is undergoing significant change and we are positioning ourselves well to compete.

“We still have a lot more to do to achieve our ambition of being the best bank for customers in the UK and Republic of Ireland.

“However, with our major legacy issues largely behind us, we are able to fully focus on closing this gap.”