Why Royal Bank of Scotland (ERBS) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Royal Bank of Scotland Group  (RBS) are down -2.32% to $11.38 in pre-market trade after the bank confirmed it was considering selling the international arm of its private bank, a deal one source said could net it as much as $1 billion, as the British government leans on it to focus more on domestic lending, Reuters reports.

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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 increase in stock price during the past year, increase in net income and growth in earnings per share. 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:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 211.2% when compared to the same quarter one year prior, rising from $370.41 million to $1,152.75 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 -$2.68 versus -$1.72 in the prior year. This year, the market expects an improvement in earnings ($56.52 versus -$2.68).
  • 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.
  • You can view the full analysis from the report here: RBS Ratings Report

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