Royal Bank Of Scotland Group plc’s (LON:RBS) (LSE:RBS.L) shares could be impacted by today’s results.
The part-nationalised bank has registered an attributable loss of £6995 million compared with £1979 million in 2015. The loss included litigation and conduct costs of £5868 million, restructuring costs of £2106 million, payment of the final DAS dividend of £1193 million, a £300 million deferred tax asset impairment and Capital Resolution disposal losses and impairments of £825 million.
RBS’s adjusted cost:income ratio for 2016 was 66% compared to 72% in 2015. This is good news for the bank’s investors in my view, while I feel a reduction of £3 billion in adjusted operating expenses in the last 3 years could also improve its share price prospects.
Tangible net asset value (TNAV) per share decreased 56p to 296p compared with 2015 principally reflecting the attributable loss for the year. The net interest margin of 2.18% for 2016 was 6 basis points higher than in 2015, as the benefit associated with the reduction in low yielding assets more than offset modest asset margin pressure and mix impacts across RBS’s core franchises.
In the last 3 months, RBS’s share price has risen 21%. This is a higher return than other bank shares such as Barclays PLC (LON:BARC) (LSE:BARC.L), Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L), HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L) and Banco Santander SA (LON:BNC) (LSE:BNC.L). HSBC’s shares are up 1%, Barclays’s share price is 7% to the good, Santander’s shares are 17% up and Lloyds’s share price has risen 16% in the last 3 months.
In my view, RBS’s shares have some investment appeal for the long term. I think its cost reduction is a positive and I feel it is slowly making progress towards returning to full health. However, I think Barclays, HSBC and Lloyds are my favoured shares among bank stocks. I feel they offer a lower risk investment opportunity, although I believe RBS’s shares could still perform well in the long run.