Royal Bank of Scotland (RBS) saw its share price slump more than 4% to 225p after third-quarter results failed to live up to expectations. Today’s sell-off, one of the bigger declines among FTSE 100 stocks today, takes the shares back to where they were trading 18 months ago.
While total income was slightly better than estimates at £3.4bn, net profits of £448m were well below the average analyst forecast of £507m, as compiled by the company.
As with Barclays (BARC) and Lloyds (LLOY) (which you can read about here and here), loans and deposits are flat on the same quarter a year ago. Yet RBS, which remains 62%-owned by taxpayers, seems to be feeling the squeeze on lending rates more keenly than its rivals. Net interest margin dropped sharply to just 1.93%, compared with 2.12% at the same time last year.
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Investors are also rattled by another £200m of payment protection insurance (PPI) charges in the third quarter and an extra £100m of provisions for bad loans. This latter point is the bank's reaction to ‘the uncertain economic environment’ which is being taken as a reference to Brexit effects.
The lack of news on the dividend front is also disappointing. Many would have hoped to get confirmation that the 2p a share half year payout announced in August, and distributed earlier this month, was the start of a return to regular dividends. So far RBS is staying mum on its income plans.
Sticking to forward guidance that was announced several months ago, alongside its 2017 annual report, might suggest that management are as in the dark about near-term prospects as anyone else.
