CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

RBS share price: four things to watch out for in its full-year results

Royal Bank of Scotland will release its annual earnings on Friday and with analysts forecasting a strong end to 2018 for the UK lender there are reports that the British government is considering a partial sell-down of its stake.

The UK government is reportedly considering a partial sell-down of its stake in Royal Bank of Scotland (RBS) following the release of the lender’s full-year earnings report on Friday, with analysts expecting the bank’s profits to double.

‘RBS shares have already rallied by 23% over the past two months,’ Investec analyst Ian Gordon said in a note to investors. ‘It’s (almost) time for the UK Government to leave. Another circa 10% or so and we suspect that it will become a willing seller again.’

Despite the British government and RBS providing no comment to substantiate the rumours of a sell-down, the bank’s shareholders approved a plan to acquire up to 5% of its shares when the government eventually sells at a meeting in Edinburgh on Wednesday last week.

‘The timing of any future share sales is highly uncertain and entirely in the hands of the Treasury,’ RBS Chairman Howard Davies said at a shareholders meeting.

1: RBS set to pay out £1 billion dividend

With the UK lender expected to record its second year of profits on Friday, there are also reports that the bank will use its trading update to announce a £1 billion dividend pay-out, providing a major boost in confidence for long-suffering shareholders and taxpayers.

Analysts are forecasting that the bank will issue a special dividend of 3p a share on top of an ordinary dividend of 6p a share in its full-year earnings report on Friday.

The UK Treasury controls a 62.3% stake in RBS, with government coffers in line for a £675 million windfall if reports of a special dividend turnout to be true.

It has taken RBS until 2017 to return to profit after the lender received a government bailout valued at around £45 billion following the 2008 financial crisis, an event which also led to the bank being fined $5.5 billion by the US Department of Justice over its mis-selling of toxic mortgage bonds.

2: RBS profits set to double

On Friday, the lender is forecast to record its second consecutive year of profits since its government bailout a decade ago, with the bank expected to end the year around £1.4 billion in the black.

If RBS is able to meet analysts’ expectations, it will double its profits from the previous year which came in at £752 million, helping the lender to convince the UK government that now is the right time to sell-down its stake in the bank.

3: UK government may wait for RBS stock to rise before selling down stake

Despite the mounting pressure for the government to sell-down its stake in RBS following what is expected to be its second consecutive year of profitability the Treasury stands to lose a lot of money due to the state of the bank’s share price.

As it stands, the bank’s share price is trading at around 238p a share, with RBS initially bailed out at 502p a share – meaning that if the government were to sell-down its shareholding in the lender it would do so at a significant loss.

The government has said that it plans to sell-down its remaining 62.4% stake in the UK lender by 2024, so it may want to hold out until the bank’s share price regains some of its losses.

However, the Treasury is also likely mindful about the potential impact that Brexit could have over the short to medium-term and may think it wise to sell down a small portion of its holding ahead of the Britain’s departure from the EU.

4: Brexit remains a barrier to government sell-down

A key issue that investors will be focus on when RBS announces its results on Friday will be its stance on Brexit, with the lender seeing its share price take a it after it announced a £100 million charge to reflect the ‘more uncertain economic outlook’ in the UK ahead of the March 29 it its third quarter earnings.

‘After a poor 2018 the share price has regained some upward momentum this year,’ analysts at The Share Centre said. ‘Investors will be hoping for better news on revenues and impairments over the final quarter.’

‘Other areas of interest will be the group's outlook, especially relating to Brexit, future dividend policy and any further news on buying back shares from the Government,’ analysts added.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Trading around Brexit

Find out how the UK’s exit from the EU continues to affect traders, and discover:

  • The unique opportunities in a ‘hard’ and ‘soft’ Brexit
  • The markets you should be watching
  • Everything that’s happened so far

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change
-
-
-
-
China 300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.