Today I am outlining why Royal Bank Of Scotland (LSE: RBS) (NYSE: RBS.US) could be considered an attractive addition to any stocks 
portfolio.
Bad debts on the mend
Royal Bank of Scotland cheered the market last month when its latest trading update revealed a substantial improvement in bad debts on both sides of the Irish Sea.
The company said that the result of an improving UK economy would allow it to pull back £500m from its RBS Capital Resolution ‘bad bank’ for the July-September period, while an improvement in the Irish property market would allow Ulster Bank to release £300m from its bad loans capital pile.
As a consequence the business noted that it should “significantly outperform” its prior impairment estimate of £1bn for the current year. This is the third such upgrade this year, and investors should expect further good news should economies across the British Isles maintain their solid momentum.
Dividends expected to roar
Royal Bank of Scotland’s part-nationalisation in the wake of the 2008/2009 financial crisis forced it to can its previously-solid dividend policy, of course. And many investors had been expecting the institution’s transformation programme to facilitate a return to paying out prime dividends from next year at the latest.
So at first glance, chief executive Ross McEwan’s statement last month that the bank would not be looking to start shelling out shareholder payouts once more within the next 18 months. The bank’s boss said that the array of legacy issues facing the firm, and subsequent possibility of financial penalties, prompted the delay.
However, in my opinion the decision would appear prudent given that the firm still faces a lengthy bill related to the mis-selling of payment protection insurance and interest rate hedging products. The Financial Conduct Authority (FCA) is also expected to rule on Royal Bank of Scotland’s alleged involvement in the manipulation of global currency markets in the next few weeks, and rumours of record fines for the main perpetrators have recently been doing the rounds.
And once the firm’s balance sheet is on seemingly firmer ground, City analysts expect the restructured institution to introduce shareholder payments at very decent levels from the off. Indeed, Investec has pencilled in a payment of 10p per share for 2016, a projection which creates a tasty yield of 2.8%. And an anticipated hike to 15p in the following year drives this yield to an impressive 4.2%.
