If you want to get rich and retire early, I’d take advantage of the stock market crash to go shopping for shares today. I’d be looking at bargain FTSE 100 stocks like Royal Bank of Scotland Group (LSE: RBS), with the aim of holding them until markets recover and beyond.
The RBS share price is up 3% this morning despite it reporting that profits halved in the first quarter. They would have risen by a healthy 20%, but bad debts are set to jump sharply due to Covid-19. Investors knew what to expect, as other banks made similar provisions earlier this week.
RBS has been hit by the stock market crash but still looks to me like a bargain FTSE 100 stock, if you plan to hold it for the long term. You could be rewarded for buying at the moment of maximum crisis. This will turbocharge your quest to retire early and have some fun.
Use the stock market crash
The pandemic will continue to menace the economy, and rattle stock markets for months. The recovery could be slow, as many Britons will be reluctant to move out of lockdown, even when the government eases the rules. You could hold off investing until we get the all-clear. But you will have missed your opportunity to buy bargain FTSE 100 stocks like this one, to boost your chances of retiring early.
RBS is in the eye of the coronavirus storm right now. Operating profit fell from £1bn to £519mto 30 March, even though the lockdown only took hold in the final weeks. It set aside £802m for bad debts, up from from £86m last year.
Retire early by planning ahead
Along with the other high street banks, RBS stopped all dividend payouts and share buybacks under pressure from the Prudential Regulation Authority. We learned today that management is committed to its dividend but “will defer decisions on any future shareholder distributions until the end of 2020”.
Falling GDP, near-zero interest rates, flat yield curves and ongoing market uncertainty will hit the bank. RBS also said planned regulatory changes will reduce personal business income by around £200m.
Buy this bargain FTSE 100 stock
There was good news as well. Total income rose 4.1% to a better-than-expected $3.2bn. Litigation and conduct costs fell sharply, with the PPI provision down to just £100m, after it received fewer-than-predicted valid complaints.
RBS’s common equity tier 1 capital ratio climbed from 16.2% to 16.6%, putting it in a solid financial position. Cancelling the dividend and buy-backs have helped. Cost-cutting plans should give it another lift.
The months ahead will be tough, and we may even see another stock market crash. However, RBS still looks tempting, trading at a price-to-book value of just 0.3. If you want enough money to retire early, a bargain FTSE 100 dividend stock like this one could help.
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Harvey Jones 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.