Aided by a decline in the amount of bad loans on the company's books and a decrease in operating expenses due to over 6,000 jobs being eliminated, the bank more than doubled its year over year quarterly profit to $2.02 billion in the first quarter.
TheStreet Ratings team rates ROYAL BANK OF SCOTLAND GROUP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROYAL BANK OF SCOTLAND GROUP (RBS) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Banks industry. The net income has significantly decreased by 248.9% when compared to the same quarter one year ago, falling from -$4,079.45 million to -$14,234.11 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.
- ROYAL BANK OF SCOTLAND GROUP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROYAL BANK OF SCOTLAND GROUP reported poor results of -$2.68 versus -$1.72 in the prior year. This year, the market expects an improvement in earnings ($83.42 versus -$2.68).
- Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- The revenue growth came in higher than the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- You can view the full analysis from the report here: RBS Ratings Report