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Royal Bank of Scotland Group plc (RBS) Ord GBP1

Sell:273.90p Buy:274.10p 0 Change: 2.00p (0.73%)
FTSE 100:0.54%
Market closed Prices as at close on 20 April 2018 Prices delayed by at least 15 minutes | Switch to live prices |
Sell:273.90p
Buy:274.10p
Change: 2.00p (0.73%)
Deal now Deal for just £11.95 per trade in a ISA, Lifetime ISA, SIPP or Fund & Share Account
Market closed Prices as at close on 20 April 2018 Prices delayed by at least 15 minutes | Switch to live prices |
Sell:273.90p
Buy:274.10p
Change: 2.00p (0.73%)
Market closed Prices as at close on 20 April 2018 Prices delayed by at least 15 minutes | Switch to live prices |
Deal now Deal for just £11.95 per trade in a ISA, Lifetime ISA, SIPP or Fund & Share Account
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

HL comment (23 February 2018)

Reported operating profits are back in the black at RBS, the first time in a decade. That's largely thanks to a huge fall in conduct charges.

Underlying operating profits are up 31% to £4.8bn. However, performance slipped slightly in the fourth quarter, with total income below both Q3 and the same period last year and an operating loss of £583m as conduct costs spiked.

The major US Department of Justice fine remains unresolved.

The shares fell 4.3% in early trading.

Our View

Deep in RBS there's a decent bank trying to get out.

Stripping the bank back to a few core businesses has proven time consuming and expensive. But the end is finally in sight.

The troublesome capital resolution 'bad-bank' has been wrapped up, freeing reserves and bolstering the bank's capitalisation.

Costs are coming down, and loans to customers continue to grow. Record low interest rates and a competitive mortgage market are hampering net interest margins (the difference between what the bank pays out on deposits and charges on loans), but also means bad debts have stayed low.

After 9 years of losses the bank proved profitable in 2017 (unexpectedly), but that's not as good as it might sound. The bank had been expected to put its historic misdemeanours to bed this year, but has proven unable to do so.

The bank still faces a potentially huge fine from the US Department of Justice for mis-selling US residential mortgage backed security (RMBS). Exactly how big the final bill will be remains to be seen, but we'd hoped to get some indication in 2017.

The other elephant in the room is the government's 70% shareholding. When the bank's over the short term hurdles that will have to be unwound, and it's difficult to see how that can be achieved without holding back the share price.

Getting RBS back on the right path is a marathon task. The bank has run the first half surprisingly well, but there's still no guarantee it won't 'hit the wall'. As the group said at the half year stage, "the timing of dividends or buybacks remains uncertain."

Register for updates on Royal Bank of Scotland

Full Year Results

Total income rose by 4.3% in 2017 to £13.1bn.

This reflects a 5.7% increase in interest earning assets to £422bn, partially offset by a slight decline in net interest margin (the difference between what the bank pays on deposits and charges on loans) to 2.13%.

NatWest Markets was the only one of the major division to post an operating loss for the full year, although at £1.2bn this was still an improvement on the previous year.

Operating costs fell by 35.8% to £10.4bn. Although lower conduct costs accounted for the majority of this fall the group also reduced staff costs by 9%.

Together these drove a significant improvement in RBS' underlying cost to income ratio, which fell 7.8 percentage points to 58.2%.

The groups CET1 ratio, a measure of banking capitalisation, rose 0.25 percentage points to 15.9%.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.


Previous Royal Bank of Scotland Group plc updates

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