9) Royal Bank of Scotland (RBS)
This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Like Barclays, Royal Bank of Scotland finds itself also languishing around levels not seen for 4 years. The difference is that it’s got a little further to fall to hit its own historic low point just south of £2. The bailed out bank (peer of LLOY) recently paid £1.2bn to its major shareholder, the UK treasury, to buy itself out of the Dividend Access Share (DAS) – something created by the government after it bailed out the bank in 2008. So, can investors now expect RBS to resume paying its dividend? Er, not until 2017 at the earliest – the bank is yet to return to profitability, and now has a further £1.2bn to go to get there!
What’s more, at the end of March Royal Bank of Scotland unveiled a £5.2bn bond buyback which, while yet another outflow to deal with, is not at odds with what sector peers are doing and will help reduce the cost of servicing debt. Put it this way, with all that cash no longer in its pockets, the bank’s even poorer than it was at the beginning of the year, but on the flipside, at least RBS’s trousers are less likely to fall down.
Do you think shares in RBS will rally back to the highs of 400p or fall towards 2012 lows of 150p?
Brokers are neutral to bullish on RBS. Note Day by Day’s ‘sell’ rating of 3 Feb has been hit, while 18 subsequent ratings have been either outright bullish or neutral with Jefferies the unabashed bull seeking 122% upside.
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