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This is what I’d do about the RBS share price right now

Over the last 10 years, Royal Bank of Scotland Group (LSE: RBS) has repeatedly disappointed investors hoping for a turnaround. However, I believe that patient shareholders may soon be rewarded.

The RBS share price has performed strongly this year and market sentiment is improving. In this piece I’ll explain why I’m holding onto my shares. Plus I’ll look at a fast-growing small-cap financial firm that’s just released some attractive numbers.

One big number

One remaining hurdle for RBS is that the UK government still owns 62% of the bank’s stock. This £20bn shareholding means that the government may have some influence over the bank’s activities and strategy.

Another concern is that we know the government wants to sell by 2024. This means there is a big ‘overhang’ of stock that will need to be sold into the market. If demand isn’t strong enough, this could depress the bank’s share price.

RBS is trying to address these concerns by offering to buy back some of the government’s shares. It’s gained shareholder approval to buy back up to 4.99% of its shares each year — about £1.6bn at current prices.

The timing of government share sales is uncertain, but I believe a buyback of this kind would be good news for shareholders.

Outlook is improving

RBS shares have risen by 26% so far in 2019, reversing the falls seen during the final quarter of last year. After a strong set of annual results in February, investors seem to be gaining confidence. Earnings forecasts for the current year have been rising and the stock’s discount to its book value is disappearing fast.

Last year’s results confirmed that the bank’s profitability is improving. RBS stock now trades on 9.5 times 2019 forecast earnings and offers a 4.6% yield. For long-term income investors, I believe this could be a good buying opportunity.

Dividends + growth from this small cap

Another financial stock I’m keen on is small-cap fund manager Miton Group (LSE: MGR). Shares in the firm are up by 13% at 59p at the time of writing after the group’s 2018 results came in significantly ahead of expectations.

Earnings for last year came in at 4.7p per share, nearly 15% ahead of analyst’s forecasts. The group’s 2018 dividend of 2p per share also beat forecasts for a payout of just 1.76p per share.

Cash inflows boost results

This specialist firm has a good track record of performance. At the end of 2018, 81% of its funds were in the top 50% of the market, in terms of their performance against rivals.

Customers appear to be keen to add more of their cash to the group’s funds. Net inflows rose to £1,019m in 2018, more than double the figure for 2017. This left the group’s total assets under management (AuM) up by £553m to £4,376m.

Although some of the firm’s funds were hit by the market sell-off at the end of last year, this was true across the market. In my view, it doesn’t detract from Miton’s strong track record.

I expect analysts’ forecasts for 2019 to be upgraded following today’s results. Although the group’s performance is dependent on wider market conditions, I see this as one of the best options in the fund management sector.

Miton shares now yield 3.4%, providing a useful income for patient shareholders. I remain a buyer.

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Roland Head owns shares of Miton Group and Royal Bank of Scotland Group. 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.