ii view: RBS profit cut low by Covid-19

by Keith Bowman from interactive investor |

Events outside of its control have impacted, but is investor sentiment finally turning for the better?

First-quarter results to 31 March 2020

  • Bad debt provision of £802 million
  • Profit attributable to shareholder down 59% to £288 million
  • Capital cushion (CET1) of 16.6%, up 0.4%
  • Previously announced – no dividend payment

ii round-up:

Serving more than 18 million customers on a global basis, the bank’s brands include Royal Bank of Scotland itself, NatWest, Ulster Bank, Child & Co, Drummonds and Coutts. 

In September, RBS appointed new chief executive Alison Rose, formerly the deputy CEO of NatWest Holdings and CEO of Commercial and Private Banking. 

For a round-up of these first-quarter results, please click here

ii view:

In 2018, and 10 years on from the height of the financial crisis, RBS passed the Bank of England’s stress tests. The bank’s journey through and out of the financial crisis has few rivals. 

Following fines and settlements already made for the bank’s part in the US mortgage securities crisis, provisions to cover the mis-selling of Payment Protection Insurance (PPI) then followed. Now, just as RBS appeared to be out in the relative clear, Covid-19 has caused a huge shutdown of businesses, requiring more provisions to offset likely bad debts and again hitting profits. 

That said, the bank’s painfully slow climb back to better health does still appear to broadly underlie current events. The arrival of a new CEO should help to reenergise its path to recovery. The capital cushion has been bolstered to 16.6% - Lloyd's (LSE:LLOY) is currently 14.2% - and management continues to try and get to grips with the demands of its investment bank NatWest Markets on group returns. In all, while Covid-19, Brexit and the overhang from the government’s still significant share stake all need to be remembered, chinks of light at the end of the tunnel are visible. 

Positives  

  • A cost saving target of £250 million
  • Capital cushion is one of the highest in the sector

Negatives

  • Facing significant economic uncertainty
  • UK government’s shareholding of over 60%

The average rating of stock market analysts:

Buy

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