RBS share price slides after admitting it will miss profit target
Royal Bank of Scotland saw its share price fall on Friday after the lender blamed Brexit for derailing its profit and cost targets for next year, despite recording a strong set of half-year results.
Royal Bank of Scotland Group (RBS) told investors on Friday that it will likely miss next year’s profit and cost targets, with the lender blaming adverse economic conditions brought about by Brexit for its poor outlook.
‘Given current market conditions, continued economic and political uncertainty and the contraction of the yield curve, it is very unlikely that we will achieve our target return on tangible equity of more than 12% and cost-income ratio of less than 50% in 2020,’ the company said.
The news led to the lender’s share price tumbling more than 6% to 203p as of 14::10 GMT on Friday, despite the bank unveiling a strong set of half-year results on the same day.
RBS results: key figures
In its half-year results, RBS surprised investors with an interim ordinary dividend of 2p a share, along with a special dividend of 12p, representing a £1.7 billion pay-out for shareholders.
The UK government, which still holds a 62% stake in RBS will receive a £1 billion pay out from the special dividend.
In its second quarter (Q2), RBS recorded £1.68 billion in pre-tax profit, helping the bank deliver a 15.8% return on tangible equity.
Its results highlight the impact that outgoing CEO Ross McEwan has had on RBS, with his stewardship helping the bank to build a strong foundation.
However, the lender’s 2020 outlook is a major concern for whoever takes his place, as they will likely have to navigate the fallout of a no-deal Brexit.
‘This is overall another set of disappointing of results from RBS, which is now facing an extremely demanding operating environment,’ analyst Edward Firth at broker KBW told Reuters.
Practise trading Royal Bank of Scotland shares and other UK banking stocks with an IG demo account.
RBS braces for economic and political uncertainty
The bank faced a difficult road to recovery after its £45 billion bailout in the wake of the financial crisis a decade ago.
In the years that followed, RBS has made significant progress with its turnaround strategy, however, the bank must now battle against economic and political uncertainty as it attempts to return the lender to private hands.
‘The subdued outlook for interest rates is affecting all banks, global economic growth prospects are less favourable, trade tensions between China and the U.S. continue to be strained ... and that’s also affecting market confidence,’ RBS Chairman Howard Davies said.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
See an opportunity to trade?
Go long or short on more than 17,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
