By Malcolm Stacey | Friday 16 June 2017
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello Share Smirkers. Normally I favour Lloyds (LLOY) when commending banks to your further inspection. But progress on that bank’s share price has been hesitant on days when its rival RBS (RBS) motors ahead. Though of late, RBS has weakened too - a casualty of the political uncertainty which becomes even more uncertain as the days roll by.
It’s possible that recent small dips in RBS’s share price might afford a buying opportunity.
The outlook for the banking giant might seem a bit rocky. It could be fined as much as $15 billion after the US sub prime mortgage debacle. But I can’t see the fine being quite as hefty as that.
And at least the bank has now reached settlement with shareholders sucked into a failed rights issue during the big crisis of 2008. That’s one less thing to for RBS to worry about.
A big drag on the share price has been the government’s continuing shareholding, together with the possibility of Whitehall interference that comes with it. But the Tories now say they’re happy to sell the government stake at a loss, so we should soon be free of any bungled government interventions.
Meanwhile, RBS’s normal banking business is moving back on its feet. Mortgage business is improving. Unlike LLoyds, RBS has still to pay a dividend. But that’s expected to change in 2018. That big American fine threat is likely to be already factored into the current share price. And if it turns out to be less than feared, then shareholders may be in for a nice surprise.
Yes, it’s a risk supporting banks, even though they’ve had 10 years to get back on track after the sub prime ramifications. But more than most Footsie members, share prices can rise quite quickly in a week, which should attract short-term investors to buy on the dips. For RBS, we appear to be in one now.
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