The Motley Fool

A SWOT Analysis Of Lloyds Banking Group PLC And Royal Bank of Scotland Group plc

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.

Lloyds Banking Group

Shares in Lloyds Banking (LSE: LLOY)(NYSE: LYG.US) have had a good run this year. However, they have recently struggled to advance significantly above the level that the UK government recently began selling at.

Strengths

Lloyds recently reported that at the end of September it had a core tier 1 ratio (a key measure of a bank’s safety) of 9.9%. This was up from 8.1% at the end of 2012. Lloyds’ continued profitability is protecting shareholders from future losses and increasing the chance that it may soon begin paying dividends again.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Weaknesses

Unfortunately, Lloyds has little international diversity. This makes the bank particularly exposed to the domestic economy. The financial crisis highlighted the dangers of this strategy as UK-focused banks either went bust or nearly bust.

Opportunities

The demise of former competitors Northern Rock and Bradford & Bingley will make it much easier for Lloyds to win UK business than before. This will help Lloyds’ profitability.

Threats

Lloyds continues to rack up new PPI compensation costs. The recently quarterly announcement confirmed another charge of £750m. There is also the possibility of further fines and costs if Lloyds is found to have participated in exchange rate fixing.

Royal Bank of Scotland

I think that there is room for significant share price rises at RBS (LSE: RBS) (NYSE: RBS.US).

Strengths

RBS still have some significant international assets. The bank has mortgage assets of around £20bn in its US arm Citizens and has a similar amount of exposure in Ireland. Although RBS has committed to beginning a sale of Citizens next year, it is expected to retain a stake into 2016.

Weaknesses

RBS still retains considerable non-core assets of around £37bn. If these dubious assets get revalued downwards, the impact on profitability could be significant.

Opportunities

RBS continues to demonstrate the value of its business via disposals. This should make the bank a more profitable operation.

Threats

Majority shareholder in RBS, the UK government, has done much to undermine the company’s share price. For as long as the government is on the shareholder register, the risk of further expensive interference remains.

Given the relative share valuations (Lloyds trades at 1.5 times book value, whereas RBS trades around 0.8 times) I will be sticking with my RBS investment.

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 daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

> David owns shares in Royal Bank of Scotland but none of the other companies mentioned.

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.