RBS share price: what to expect from Q4 results

Investors will be looking for improving returns and a reduction in costs to help drive an improved return on equity (ROE) for shareholders, as well as the group's back-up plans for risks relating to a looming Brexit.

When is RBS’s results date?

The Royal Bank of Scotland (RBS), the New York Stock Exchange (ADR) and FTSE-listed international and financial services provider is scheduled to release fourth quarter (Q4) 2018 results on Friday 15 February 2019.

What does the City expect?

Bloomberg consensus estimates for Q4 2019 results are as follows:

RBS Q4 results metric Estimate in GBP
Earnings per share £0.052
Revenue £3.264 billion
Net income (adjusted basis) £411 million

In terms of the annual results, estimates are as follows:

RBS annual results metric Estimate in GBP
Earnings per share £0.285
Revenue £13.27 billion
Net income (adjusted basis) £3.189 billion

How to trade the RBS results

Markets will be wanting to see RBS producing results on its suggested deliverable of improving returns 'driven by sustainable growth' primarily within the group’s core businesses. Investors and traders alike will be focused on how the group is managing to contain costs as well as deal with margin pressure within the competitive mortgage business.

The banking sector by default incurs risk from the upcoming UK separation from the European Union (EU) as UK banks generate a good proportion of their respective revenues – roughly a quarter - from the EU. Markets will want to know on the eve of the Brexit deadline what the group’s contingency plans are for the numerous outcomes the event could hold.

It would, however, appear that traders (short-term) and analysts (long-term) are optimistic on the outlook for the RBS.

Broker ratings graph

A Thomson Reuters poll of 21 analysts maintain a long-term average rating of buy for the RBS, as of 7 February 2019, with seven of these analysts recommending a strong buy, eight recommending a buy, five hold and two with a strong sell recommendation on the stock.

Client sentiment chart

From a retail trader perspective, as of 7 February 2019, 92% of IG clients with open positions on the Royal Bank of Scotland expect the price to rise over the near term, while 8% of IG clients with open positions expect the Bank's share price to fall.

RBS share price: technical analysis

A chart of RBS shows some mixed signals when applying conventional technical analysis indicators (moving averages and stochastic).

  • The 20-day simple moving average (SMA) is trading above the 50 SMA, suggestive of the short- to medium-term price trends being up
  • The price has now crossed above the 200 SMA which suggests that the long-term downtrend has now been broken - although this does not yet confirm the long-term trend to be up
  • The stochastic trades in overbought territory suggesting that the short-term gains may be reaching a point of capitulation

The overbought signal does conflict with the moving average suggestions that the short to medium trends are up. We do, however, place more validity on the indications of trend (moving averages) rather than those of momentum (stochastic).

Technical analysis favours a long bias to RBS share price towards 253 resistance

With this in mind, we favour keeping a long bias to trades on RBS at present, although this is with lower conviction due to the misaligned signals. For a higher conviction (in keeping a long bias to trades), we would prefer to see the 20 SMA and 50 SMA trading above the 200 SMA, as this would suggest that the longer-term trend is now aligned with the short- to medium-term uptrends already in place.

The share price of RBS trades between the 239 support and 253 resistance levels. Keeping a long bias to trades would favour a move towards the 253 resistance level, a break of which (with a close above) would consider the next resistance target at 262.

Should the share price instead move to close below support at 239, the bullish bias would no longer be favoured and further downside may be expected.

What to expect from RBS Q4 results

  • IG clients with open positions on RBS overwhelmingly expect the share price to rise in the short term
  • A Thomson Reuters analyst poll suggest the average long-term rating for RBS to be a buy
  • From a technical prospective, the short- to medium-term trends for the share price of RBS remain up, although the share is overbought in the near term
  • The trends are considered to carry a higher relevance than the overbought signal and in turn traders might prefer keeping a long bias to trades on the share
  • Markets will be looking to here Brexit contingency plans from the group
  • In terms of the actual results, markets will look to see the group delivering on its sustainable growth objectives, whilst containing costs and improving the ROE for investors

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