Report: TD Bank (TD) Eyeing RBS (RBS) U.S. Arm

NEW YORK (TheStreet) -- TD Bank (TD) is allegedly considering a bid for Royal Bank of Scotland's (RBS) U.S. retail banking arm Citizens Bank, reports The Sunday Times.

RBS has previously stated it expects to float 20% to 25% of its Citizens business in New York within the next two years. The bank, which is 82% British Government-owned, faces political pressure to refocus lending within the UK.

A TD Bank spokesperson declined to comment on the reports. At the time of publication, RBS had not responded to a request for comment.

TD Bank shares had fallen 0.15% to $89.22 and RBS had dropped 1.8% to $11.82, as of 9:45 a.m. New York time. 

TheStreet Ratings team rates Toronto-Dominion Bank as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Toronto-Dominion Bank (TD) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for Toronto-Dominion Bank is currently very high, coming in at 80.35%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.79% is above that of the industry average.
  • Net operating cash flow has significantly increased by 53.22% to $11,472 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 30.76%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The change in net income from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income has decreased by 10.5% when compared to the same quarter one year ago, dropping from $1,677 million to $1,501 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, Toronto-Dominion Bank has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

TheStreet Ratings team rates Royal Bank of Scotland Group as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Royal Bank of Scotland Group (RBS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 133.33% and other important driving factors, this stock has surged by 47.02% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 165.4% when compared to the same quarter one year prior, rising from -$566.19 million to $370.41 million.
  • Royal Bank of Scotland Group reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Royal Bank of Scotland Group reported poor results of -$1.72 a share vs. -58 cents a share in the prior year. This year, the market expects an improvement in earnings ($37.07 vs. -$1.72).
  • RBS, with its decline in revenue, slightly underperformed the industry average of 3.8%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market, Royal Bank of Scotland Group's return on equity significantly trails that of both the industry average and the S&P 500.

 Written by Keris Alison Lahiff.

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