Financial Trading Blog
Stock of the day 22/02/2016 – Royal Bank of Scotland Group PLC
Whilst RBS didn’t see a huge movement around its third quarter report back at the end of October its result did help cement its continued decline. The sale of US bank Citizens did help its net profit rise to £952 million from £896 million year-on-year; however, revenue fell by nearly £600 million to £3.04 billion, whilst, damningly, the bank warned that the various costs for the sector’s multiple misbehaviours ‘could be substantially greater than the aggregate provisions RBS [had] recognised’.
This saw RBS tumble to a low of £2.82 by the middle of December, only to lift back above the £3 mark as 2015 came to a close. Yet this rebound was short-lived, and as 2016 the bad news only began to multiply for the bailed-out bank.
(Source: IT-Finance.com 22/02/2016)
Falling to £2.80 by the middle of January the bank’s sell-off, previously based on macro-movements, intensified as it issued an incredibly bearish note that warned its clients to ‘sell everything except high quality bonds’ as the markets prepare for a ‘cataclysmic year’. The bank continued to drop as the month went on, with an update at the end of January seeing RBS reveal that a ‘clean-up’ plan will push it to a full year loss for 2015, whilst also announcing another £500 million in PPI costs, £1.5 billion in US litigation related to bad housing debts and a £498 million write-down from Coutts.
Add onto that the sector-wide fears that plagued the start of February and by the 11th of that month the stock had hit £2.21, its worst price since September 2012. Royal Bank of Scotland now sits at a current trading price of £2.50 (IT-Finance.com, 22/02/2016).
In terms of its full year figures on Friday, given that investors are aware that the bank is set to post its 8th annual loss in a row, much of the attention will likely focus on its various costs and fines, especially RBS’s unresolved issues with the US Federal Housing Financial Agency. Analysts are also expecting the bank to announce it is cutting around 300 more branches as online and mobile transactions surge 400%.
Royal Bank of Scotland Group PLC has a consensus rating of ‘Hold’ with an average target price of £3.36.
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