Royal Bank of Scotland Group plc (LON: RBS) (LSE: RBS.L) has today released half year results for the six months to 30 June. The part-government owned bank has reported an operating loss before tax of £274 million and an attributable loss of £2045 million. This latter figure includes the final Dividend Access Share (DAS) dividend of £1193 million in Q1 as well as £1315 million of litigation and conduct costs.
The bank’s adjusted operating profit of £1156 million is £1737 lower than in H1 2015. This is principally due to increased loans in Capital Resolution and higher IFRS volatility losses. However, RBS’s adjusted operating expenses fell by £547 million versus H1 2015 and this included a £227 million VAT recovery following agreement with HMRC on recovery rates in previous years.
RBS’s adjusted cost:income ratio was 72% compared with 64% in H1 2015. Its lower operating expenses were more than offset by lower adjusted income principally relating to Capital Resolution and IFRS volatility losses. RBS has a common equity tier 1 (CET1) ratio of 14.5%, which is ahead of its 13% target.
Year-to-date, RBS has fallen by 39% and this is a worse performance than its sector peers such as Barclays PLC (LON: BARC), Lloyds Banking Group PLC (LON: LLOY), Standard Chartered PLC (LON: STAN) and HSBC Holdings plc (LON: HSBA). For instance, Barclays is down by 31%, Lloyds has fallen by 29%, HSBC has edged lower by 2% and Standard Chartered is up by 14% in 2016.
RBS has a P/E of 16.7 and given the uncertain look for the UK economy, I think this makes it relatively expensive. Its turnaround plan may prove to be successful, but its shares lack appeal in my view given the potentially challenging trading conditions RBS faces.
The author owns shares in HSBC but not Barclays, RBS, Standard Chartered or Lloyds at the time of writing.