Royal Bank of Scotland Chief Executive Stephen Hester said on Tuesday that the bank is targeting resuming dividend payments and that completing its recovery plan should facilitate its eventual privatisation.

Speaking at the Bank of England Merrill Lynch annual banking conference in London, Hester said RBS, which is 82 percent-owned by the government, was "nearing the point of becoming a recovered bank" and was well on the way to becoming a "good" bank.

However, he added that the next 16 months carried important execution challenges.

(Reporting by Matt Scuffham; Editing by Myles Neligan)