Is RBS back On Track?

May 21, 2019

It has been 11 years since RBS got a £45bn bail out – the largest bank bailout in history. At the time, the bank’s rescue was greeted with anger and derision by the tax-paying public, but over the years it has gradually reached its milestones and even shown signs of new growth.

As it prepares to issue its first quarter trading information, chatter amongst analyst suggests that the bank is getting back on track, and may even represent a cheap (and potentially profitable) addition to equities portfolios.

First Dividend

Last year, RBS shareholders received their first dividend payment since the global financial crisis – a grand total of 2p per share, and a final dividend of 7.5p per share.

According to Deutsche Bank, this is just the beginning. DB analysts are predicting that another £11bn could be returned to shareholders through dividend payouts within the next three years.

This prediction is largely in line with RBS’ own targets. The bank has already stated that it is aiming to produce a return on tangible equity of 12 per cent by 2020, and in its full-year update in February the bank confirmed that it was still on track to deliver on this promise.

Reduced Risk

Certainly, RBS stock represents less of a risk than it did just a few years ago. Up until last summer, UK taxpayers owned a 70 per cent stake in RBS. Last June, the government sold 7.7 per cent of its shares – worth approximately £2.6bn – with plans to sell off another £15bn in share value before 2023.

In the wake of this sale, RBS’ share price suffered slightly, and it has yet to recover despite optimistic plans for 2019 and beyond. During its full-year results announcement, RBS said it was on track to end the year with risk-weighted assets of between £185bn and £190bn.

If this target is confirmed in the first quarter trading update, RBS could represent one of the most promising – and undervalued – stocks in the FTSE 100.

So is RBS back on track? All will be revealed in their next set of figures.