RBS - Opinions

neris

just throwing out to see what people what would think of RBS as a long term invesement? Majority by the uk govt and ulster bank is causing them a few issues along with everything else

strmin

First tell us what you think.

Jim2007

neris wrote: »

just throwing out to see what people what would think of RBS as a long term invesement? Majority by the uk govt and ulster bank is causing them a few issues along with everything else

Research takes up a lot of time, so if you really expect someone to share it with you at least show us you've taken the time to do some and make a contribution....

For instance how will RBS meet the Basle III requirements?

What is their exposure the Irish property market?

What about sovereign debt of the PIGS?

Jim.

neris

I bought some RBS towards the end of last year and they havent really budged. Ulster Bank brought them down on their last results and payments to UK govt for loan protection is doing the same but they expect to be clear of that abround 2012.

ROK ON

neris wrote: »

I bought some RBS towards the end of last year and they havent really budged. Ulster Bank brought them down on their last results and payments to UK govt for loan protection is doing the same but they expect to be clear of that abround 2012.

There are some positives.
Valuation looks decent,
Capital ratios are at the high end of the range for many banks,
Funding has been improving for some time now,
Mgt (IMO) has been the most realistic of all of the UK banks and many banks altogether.
Market in general whilst generally positive on equities on a medium term basis, has been fearful of holding banks (in Europe particularly). Maybe a good contrarian call then?

There are not inconsiderable negatives:
The UK economy is IMHO is a candidate for a renewed recession.
Property market in the UK seems to have stalled.
The US economy is IMHO is a candidate for a renewed recession.
Property market in the USA seems to have stalled.
They (like Lloyds) have many business units that they will be trying to offload - what will this mean for the shape of balance sheet, profitability and capital going forward.
It will be a long time before you start getting a dividend.
The technical picture looks absolutely horrendous IMHO.

There is a pretty large share overhang (this is well known however).

Capital can get eroded very quickly if losses re-emerge from US and UK business.

As to how long Ulster Bank takes to bottom is anybodies guess.

The best that I can say, is that IFthings do not disimprove then the valuation is appealing.

In prior equity bear markets the sectors that were the cause of the bubble can take upto a decade to recover. Electronics stocks after nifty 50 broke, oil stocks after oil crises, telecom stocks after TMT bubble. Why would financial stocks be any different? However there are always exceptions.
Finally, do you have an opinion on where we are in the equity market in terms of cycles, valuation etc? The average stock will generally follow the market. You have bought a reasonably risky stock (albeit at a low valuation unless things deteriorate significantly). This implies confidence whether intended or not in the overall market.

Jim2007

Here is some info, on the Basel III status of UK banks from Morningstar.

Current expectations are that top fight European banks will come in with a Tier 1 ratio of between 12% - 14%, which is a long way from where most UK banks are and at 8% in 2013, RBS have a long way to go...

That, plus the suggested requirement to remove parental guarantees on the investment banking side makes me think there should be some better opportunities out there...

Jim.