The Motley Fool

Time to buy Royal Bank of Scotland Group plc shares as it closes 1 in 4 branches?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

In today’s digital world it seems inevitable that old, established businesses will end up closing down at least some of their bricks-and-mortar footprint as trade migrates online.

That’s certainly what the big banks are doing. Royal Bank of Scotland Group (LSE: RBS) is the third this week to announce branch closures and cuts in staffing levels, after Lloyds and Yorkshire Building Society. The knife cuts deep. One in four branches up and down the country will go, 259 in all with the loss of 680 jobs. Difficult times for some individuals, but good for the business as the costs of maintaining assets-turned-liabilities are removed.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Adapting for the future

RBS points out that it is investing in its contract with the Post Office, in digital services, and in mobile branches to serve rural communities. But more and more customers are banking online, so 62 RBS and 197 NatWest branches will disappear. In two compelling statistics, UK branch network footfall is down 40% since 2014 and mobile transactions are up a whopping 73%. I reckon this is a strong tide the bank can’t fight.

Let’s not forget that RBS is still in intensive care following the financial crisis 10 years ago. The British taxpayer, via the government, still owns around 71% of the shares, so it’s important that the bank adapts to survive and thrive going forward. Long-suffering private shareholders need the business to perform well too.

Perhaps the ducks are lining up for an investment in RBS at last. After several years of paying zero dividends, 2018 looks set to be the year that the bank finally returns to delivering a meaningful payment. Today’s share price of 273p puts the forward dividend yield at a little over 3.2% for 2018, enough to raise interest in the stock as an income investment, in my view.

Not so stressed

But is the dividend sustainable? City analysts following the firm are basing their dividend projections on resurgent earnings this year propelling the firm from annual pre-tax losses back into profits. Finally, RBS has broken its long lossmaking run, and the assumption is that earnings will lift a further 6% during 2018. The bank’s decisive action on branch closures will almost certainly help the firm’s profitability going forward.

We learnt on 28 November that the business did quite well in the Bank of England’s 2017 stress test, even though there remains distance to travel before its capital base will be considered strong enough for the future. The Common Equity Tier 1 figure came in at 7%, just missing the Systemic Reference Point of 7.4%, and the Tier 1 leverage ratio hit 4%, beating the 3.25% hurdle rate.

Glimmers of sunlight

Chief financial officer Ewen Stevenson reckons RBS is making progress towards being the stress-resilient bank we aspire to be.” But he warned: “Until we have resolved our remaining major legacy conduct issues and non-core portfolio interests, we will continue to show stress test results weaker than our long-term targets.” RBS isn’t out of the woods yet, but maybe it’s beginning to see glimmers of sunlight through the canopy that could presage a meaningful recovery from here.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

 

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.