Royal Bank of Scotland Group (LON:RBS) saw its share price drop during Friday trading, despite the good progress booked in its full-year fundamentals. The new RBS Chief Executive Alison Rose also said the company would change its name to ‘NatWest’, in an effort to move away from its wrongdoings before and during the 2008 financial crash.
The company performed well during the full-year, reporting an operating profit before tax of £4.23 billion, up from £3.36 billion a year earlier – this represents a third consecutive year of profit for the company.
RBS shareholders fared similarly well, with basic diluted EPS up from 13.4p to 25.9p, and a further £968 million being paid out in dividends, with £600 million of this sum going to the UK government.
The biggest news today, though, was the company’s announcement that it would be undertaking a strategic change of course, with new Chief Executive Alison Rose at the helm.
This was signposted by the name-change announcement, and a statement saying its NatWest Markets investment bank was set for a:
“significant transformation”
RBS said it would half its number of risky assets and would stop lending and offering underwriting services to major oil and gas producers that fail to outline credible climate change prevention plans, with the possibility of extending these measures to coal companies.
While these moves appear positive, the company declined to comment on the strong possibility of job losses and branch closures as part of a plan to cut costs by £250 million in 2020. Rose said these measures are being implemented in an effort to create a “smaller and simpler bank”.
Today’s updates came after a mixed end to 2019, with RBS and Lloyds (LON:LLOY) both landing themselves in hot water after failing a Bank of England test. However, the company were pleased to announce plans to launch its standalone online bank, Bó.
RBS Outlook
Within its outlook for 2020, the company said,
“In the current environment, and recognising ongoing market uncertainty, we continue to expect challenges on income. In addition, we anticipate that regulatory changes will adversely impact income in our personal business by around £200 million.”
“We plan ongoing operating cost take out by reducing operating expenses excluding strategic costs, litigation and conduct costs and operating lease depreciation costs by £250 million in 2020 compared with 2019. We expect to incur £0.8-1.0 billion of strategic costs during 2020 resulting from a refocussing of NatWest Markets and the continued resizing of the Group’s cost base. We anticipate that NatWest Markets exit, restructuring and disposal costs will be around £0.6 billion in 2020, with around £0.4 billion as disposal losses through income and £0.2 billion through strategic costs.”
Investor notes
Following the update, the company’s shares have dipped 6.30% or 14.40p to 214.30p per share 14/02/20 15:46 GMT. Analysts from Shore Capital reiterated their ‘Hold’ stance on RBS stock, while the company’s p/e ratio is 16.94, and their dividend yield stands at 2.57%.
