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Will Royal Bank of Scotland (RBS) Gain Post Q4 Earnings?
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The Royal Bank of Scotland Group plc is scheduled to report fourth-quarter and 2016 results tomorrow, before the market opens.
The company reported loss in the third quarter. Results were affected by reduced net interest income. However, lower operating expenses and a rise in non-interest income were the tailwinds.
Despite the disappointing results, RBS shares jumped nearly 20% on NYSE for the three months ended Dec 31, 2016. The increase was largely driven by post-election U.S. market rally and gradual improvement in the macroeconomic backdrop.
RBS, which was bailed out with £45 billion by the British government in 2008, has been striving for growth with several restructuring initiatives. These include cost-reduction measures, reducing geographic footprint and capital build-up efforts, while remaining focused on its strategy to become a smaller and simpler bank.
The bank’s ability to cope with broader industry challenges amid its overhauling moves remains a key area to watch this earning season. So, will the upcoming earnings release further lead to improvement in its share price? Let’s check out the factors that are likely to impact the results.
Factors to Impact Q4 Results
The Edinburgh-based banking giant has experienced decline in net fees and commissions in the recent quarters and we do not expect this quarter to show substantial strength. Further, the company’s revenues from advisory should not record significant improvement, as M&A activities and IPOs continued to witness weakness during the quarter. Also, the company has been downsizing its investment banking division, which is likely to witness a decline as well.
As the bank remains focused on expediting its ongoing overhaul, the quarterly results will be affected by further significant restructuring charges. Also, given RBS’ exposure to numerous lawsuits and investigations, the company might have kept additional reserves for litigation expenses, which could dampen the bottom line to some extent.
Notably, last month RBS announced litigation provision of $3.8 billion for several probes and litigation matters relating to the company’s issuance and underwriting of US residential mortgage backed securities ("RMBS"). This will adversely impact the company’s fourth-quarter results.
However, expense base may get some respite owing to RBS’ continued cost-control efforts. Also, the company might have benefited from the ongoing economic recovery (albeit at a slow pace) in the U.K. and Ireland – the major domestic markets. Growth in core U.K. loan business, particularly in the mortgage space, could act as a positive and improve the company’s interest income.
Moreover, net interest margin is expected to increase partially, reflecting the consistent benefit from reductions in the low yielding non-core assets.
Among the foreign banks, Royal Bank of Canada (RY - Free Report) will report results on Feb 24, while The Bank of Montreal (BMO - Free Report) and The Bank of Nova Scotia (BNS - Free Report) will report on Feb 28.
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Will Royal Bank of Scotland (RBS) Gain Post Q4 Earnings?
The Royal Bank of Scotland Group plc is scheduled to report fourth-quarter and 2016 results tomorrow, before the market opens.
The company reported loss in the third quarter. Results were affected by reduced net interest income. However, lower operating expenses and a rise in non-interest income were the tailwinds.
Despite the disappointing results, RBS shares jumped nearly 20% on NYSE for the three months ended Dec 31, 2016. The increase was largely driven by post-election U.S. market rally and gradual improvement in the macroeconomic backdrop.
Royal Bank Scotland PLC (The) Price
Royal Bank Scotland PLC (The) Price | Royal Bank Scotland PLC (The) Quote
RBS, which was bailed out with £45 billion by the British government in 2008, has been striving for growth with several restructuring initiatives. These include cost-reduction measures, reducing geographic footprint and capital build-up efforts, while remaining focused on its strategy to become a smaller and simpler bank.
The bank’s ability to cope with broader industry challenges amid its overhauling moves remains a key area to watch this earning season. So, will the upcoming earnings release further lead to improvement in its share price? Let’s check out the factors that are likely to impact the results.
Factors to Impact Q4 Results
The Edinburgh-based banking giant has experienced decline in net fees and commissions in the recent quarters and we do not expect this quarter to show substantial strength. Further, the company’s revenues from advisory should not record significant improvement, as M&A activities and IPOs continued to witness weakness during the quarter. Also, the company has been downsizing its investment banking division, which is likely to witness a decline as well.
As the bank remains focused on expediting its ongoing overhaul, the quarterly results will be affected by further significant restructuring charges. Also, given RBS’ exposure to numerous lawsuits and investigations, the company might have kept additional reserves for litigation expenses, which could dampen the bottom line to some extent.
Notably, last month RBS announced litigation provision of $3.8 billion for several probes and litigation matters relating to the company’s issuance and underwriting of US residential mortgage backed securities ("RMBS"). This will adversely impact the company’s fourth-quarter results.
However, expense base may get some respite owing to RBS’ continued cost-control efforts. Also, the company might have benefited from the ongoing economic recovery (albeit at a slow pace) in the U.K. and Ireland – the major domestic markets. Growth in core U.K. loan business, particularly in the mortgage space, could act as a positive and improve the company’s interest income.
Moreover, net interest margin is expected to increase partially, reflecting the consistent benefit from reductions in the low yielding non-core assets.
RBS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among the foreign banks, Royal Bank of Canada (RY - Free Report) will report results on Feb 24, while The Bank of Montreal (BMO - Free Report) and The Bank of Nova Scotia (BNS - Free Report) will report on Feb 28.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>