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Royal Bank of Scotland (RBS) Q2 Earnings: What's in Store?

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The Royal Bank of Scotland Group plc (RBS - Free Report) is scheduled to report second-quarter 2018 results on Aug 3.

In the last reported quarter, the company posted decent results, with significant year-over-year improvement. Contraction in operating expenses displayed prudent expense management. Further, non-interest income escalated and risk-weighted assets decreased.

Impacted by an uncertain global economy, shares of the company lost 13.6% on the NYSE over the last six months compared with 10.1% decline recorded by the industry.

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, reduction of 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 lead to improvement in RBS’ share price? Let’s check out the factors that are likely to affect the results.

Factors to Impact Q2 Results

This Edinburgh-based banking giant experienced decline in net fees and commissions in the recent quarters, and we do not expect it to display substantial strength in the to-be-reported quarter’s performance. The company has downsized its investment banking division, which is likely to display a decline. However, the bank’s revenues from advisory are expected to have recorded significant improvement, as M&A activities were strong during the quarter.

As the bank remains focused on expediting its ongoing overhaul, the quarterly results will reflect the impact of further significant restructuring charges. Also, given RBS’ exposure to numerous lawsuits and investigations, the company might have kept additional reserves for litigation expenses, which is expected to have dampened the bottom line to some extent.

Though the bank continues to make investments in technology in order to cope with changing customer preferences, its expense base may get some respite owing to RBS’ continued cost-control efforts.

Furthermore, net interest margin is expected to have increased partially, reflecting continued benefit from reductions in the low-yielding non-core assets.
 

Currently, 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 other foreign banks, Royal Bank of Canada (RY - Free Report) is scheduled to release results on Aug 22, while Canadian Imperial Bank of Commerce (CM - Free Report) and The Bank of Nova Scotia (BNS - Free Report) are set to report their quarterly figures on Aug 23 and Aug 28, respectively.

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