Royal Bank Of Scotland Is Making Progress Slowly
The Royal Bank Of Scotland: Undervalued As Restructuring Moves Forward
Helix Investment Research • 17 Comments
Helix Investment Research • 17 Comments
Nov. 11, 2015, 9:06 AM
- The corporate and institutional banking division will have to cut annual costs by £600M-£800M and maintain revenue of £1.3B in order to achieve an ROE of 8-10% by 2019, according to Citigroup. "This looks like a big ask to us," says the team which rates RBS a Sell. "We await more detail."
- The bank's current plan calls already calls for thousands of job cuts, and a shrinkage of risk-weighted assets at the securities unit to £30B from the current £107B.
- Jefferies' Joseph Dickerson - who rates RBS a Buy - calls the securities unit a "loss leader" for the broader corporate bank. "While management might talk about it standing on its own two feet from a returns standpoint, it’s still important for synergies.”
Nov. 9, 2015, 4:24 AM
- The Financial Stability Board has published new rules that aim to stop banks from becoming "too big to fail," confirming its final proposals for Total Loss Absorbing Capacity, or TLAC.
- Under the plan, large lenders will have by January 2019 to hold a financial cushion of at least 16% of their risk-weighted assets in equity and debt that can be written off. That requirement will gradually increase, reaching 18% of assets weighted by risk by January 2022.
- The FSB will put the rules, which will apply to the world's top 30 banks, to the G20 later this month.
Nov. 3, 2015, 3:12 PM
- After more than a decade with the bank, Bob McKillip - RBS's head of Americas and former chief of the region's investment-banking operations - will leave early next year, reports Bloomberg. The move comes as the state-owned bank continues to wind down many operations and return to being a U.K. retail lender.
- RBS has most of its U.S. operations in Stamford, CT, and about half of the 2K who worked there at the start of the year have now departed, according to the report.
- McKillip's former co-head of investment banking in the Americas - Michael Lyublinsky - left in August to join hedge fund firm Brevan Howard.
Oct. 30, 2015, 9:22 AM
- Including capital as of the end of Q3 (reported today), plus money from the sale of its remaining 20% stake in Citizens Financial (reported today), RBS will have £8B ($12.25B) in excess capital, according to Jefferies.
- Of course, there are some big costs ahead, including a £1.2B special dividend owed to the government, another £2.7B in restructuring charges by 2019, and surely more litigation costs.
- Said restructuring though, will also free up more capital - possibly another £8B by the end of next year. A smaller, simpler bank with fewer businesses should also be able to release capital charged against operational risk over the next three to four years. Oh, and RBS might even earn some profits.
- While the bank (still nearly 80% owned by the government) doesn't expect to return any cash to (non-government) shareholders before 2017, it's looking like there will be plenty available when it is able to do so.
- Source: WSJ's Heard on the Street
- Previously: RBS profits climb despite restructuring costs (Oct. 30)
- Shares -1.4% in London action
Oct. 30, 2015, 4:39 AM
- Royal Bank of Scotland (NYSE:RBS) posted a third-quarter profit rise today, despite sustained restructuring costs hitting its bottom line.
- The bank's net income rose 6% to £952M ($1.5B), compared with £896M a year earlier, although it warned that future charges relating to past misconduct could be substantially higher than expected.
- RBS also announced the sale of its remaining shareholding in Citizens Financial Group (NYSE:CFG). The 20.9% stake is worth approximately $2.5B.
Oct. 16, 2015, 4:43 AM
- According to new U.K. rules, Britain's biggest banks will have to hold up to £3.3B of extra capital between them when they are forced to ringfence their investment banking operations in 2019.
- The Bank of England's regulations are also allowing "ringfenced" banks to transfer capital from their retail arms to other parts of their businesses in the form of dividends, a move loudly applauded by the U.K.'s largest lenders.
- Related tickers: RBS, HSBC, LYG, BCS, SAN
Oct. 1, 2015, 5:11 PM
- JPMorgan Chase (NYSE:JPM) will pay almost a third of a $1.86B settlement to resolve accusations that a dozen big banks conspired to limit competition in the credit default swaps market, Bloomberg reports.
- JPM reportedly will pay $595M, followed by Morgan Stanley (NYSE:MS) with $230M, Barclays (NYSE:BCS) at $175M, Goldman Sachs (NYSE:GS) at $164M, Credit Suisse (NYSE:CS) at $160M and Deutsche Bank (NYSE:DB) at $120M; BofA (NYSE:BAC), BNP Paribas (OTC:BNPZY), UBS, Citigroup (NYSE:C), Royal Bank of Scotland (NYSE:RBS) and HSBC would pay less than $100M each.
- The deal would avert a trial and end years of litigation by hedge funds, pension funds, university endowments, small banks and other investors, who sued as a group.
Sep. 15, 2015, 9:05 AM
- Royal Bank of Scotland (NYSE:RBS) is unlikely to pay a dividend, Berenberg says, until it can show regulators two years of profit -- which means until at least 2018, a year later than expected.
- The bank had been promising to return excess capital from divestments as soon as Q1 2017.
- It's got to pass English stress tests first. And settle with U.S. regulators, say the analysts, who have a Sell on RBS. "We would be surprised if the regulator did allow the ‘excess’ capital to be returned before RBS had been profitable for two years."
- The Bank of England is set to publish its look at British lenders' health in December.
- RBS shares are down 17.1% YTD.
Aug. 14, 2015, 2:07 AM
- Five more banks have agreed to settle U.S. investor lawsuits tied to a global currency-rigging scandal, which claimed the institutions conspired to manipulate the $5.3T-a-day foreign-exchange market.
- HSBC (NYSE:HSBC), Barclays (NYSE:BCS), Goldman Sachs (NYSE:GS), BNP Paribas (OTC:BNPZY) and Royal Bank of Scotland (NYSE:RBS) now join a list of nine firms which previously settled the class actions, bringing the total amount investors have recovered to $2B.
Aug. 13, 2015, 9:01 AM
- Royal Bank of Scotland (NYSE:RBS) Global Head of Trading Michael Lyublinsky has departed to lead fixed-income in the Americas for Brevan Howard, reports Bloomberg.
- The $27B AUM hedge fund firm has been shuffling things around after posting its first annual loss last year, and also hired RBS's former head of securitized debt earlier this month.
Aug. 3, 2015, 4:47 PM
- The U.K. government today began the sale of a £2B ($3.1B) stake in Royal Bank of Scotland (NYSE:RBS), seven years after the bailout of the bank at the height of the financial crisis.
- The government said it would sell ~600M shares, representing 5.2% of the bank, at 330 pence/share in a quick sale to institutional investors after the close in London.
- The selloff is being made at a loss, as the shares were bought at an average price of 502 pence; the government will still own a 73.2% stake in the first sale, with the intent of selling at least three-quarters of the stake in the next five years.
Jul. 30, 2015, 10:17 AM
- Q2 net profit of £293M was up 27% from a year ago. Underlying operating profit - which excludes restructuring costs and conduct fines - of £1.81B slipped from £1.95B as the bank continues to pull back from investment banking.
- RBS initially jumped higher in London action, but shares are now lower by 2.7%.
- The mortgage business was a strong spot, with gross new lending up 43% for the quarter. The bank's capital ratio of 12.3% rose from 11.5% a quarter earlier, and CFO Ewen Stevenson promises the chance of a dividend once the ratio tops 13%. The first quarter of 2017 seems the earliest to expect a payout, he says.
- Source: FT
Jul. 30, 2015, 9:52 AM
- The Royal Bank of Scotland (NYSE:RBS): Q2 net income of £140M
- Revenue of £2.76B (-1.4% Y/Y)
Jul. 29, 2015, 6:21 AM
- In a larger-than-expected offering, the Royal Bank of Scotland (NYSE:RBS) has sold $2.2B in shares of the Citizens Financial Group (NYSE:CFG), as it further reduces its stake in the lender.
- "The sale of Citizens...will help us to create a simpler, stronger and more efficient U.K.-focused bank that can better serve the needs of its customers," said CEO Ross McEwan.
- After the sale and a buyback, RBS will hold a 23.4% stake in the U.S. retail bank, down from 40.8%.
Jul. 23, 2015, 2:56 PM
- Continuing to shed legacy assets, Royal Bank of Scotland (RBS -2.8%) agrees to the sale a £1.14B pound loan portfolio to an entity funded by Deutsche Bank and funds of Apollo Global (NYSE:APO) for £400M in cash. The portfolio generated a loss of £70M last year, and RBS had it valued on its books at £376M, thus generating a £24M profit on the sale.
- The other £549M portfolio sold to Cerberus Capital for £225M. It was on RBS's books valued at £223M.
Jul. 8, 2015, 8:40 AM
- Unveiling the summer budget, U.K. Chancellor Osborne says the government will gradually phase out the bank levy over the next six years, replacing it with a new 8% surcharge on profits. The difference? The new charge applies only to U.K. assets, while the bank levy applied to global balance sheets.
- Osborne may have made the change in response to threats from banks to leave the U.K. because of the levy (which Osborne increased 50% in the last budget).
- The FTSE 350 banking index is higher by 1.6% following the news. Watching with interest: HSBC, RBS, Barclays (NYSE:BCS), Lloyds (NYSE:LYG), Standard Chartered (OTCPK:SCBFF).
Royal Bank of Scotland Group Plc operates as an international banking and financial services company that provides a wide range of products and services to personal, commercial, and large corporate and institutional customers through its two principal subsidiaries: The Royal Bank of Scotland Plc... More
Industry: Money Center Banks
Country: United Kingdom
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