RBS Q3 Results What To Expect

When:
RBS will release its Q3 earnings Thursday 24th October

Expectations:
EPS 8p
Revenue £3.14 billion

Key themes:
• PPI costs
• Alison Rose
• Brexit
• Outlook for net interest margins

PPI Costs
RBS kicks off the third quarter earnings season for major high street banks. The fallout from the PPI scandal is expected to dominate, following a late surge in claims ahead of the August deadline.

After a robust first half year, which saw RBS deliver a £1.7 billion special dividend pay-out, the third quarter is looking less encouraging, as the bank prepares for a big PPI mis-selling hit. RBS has already warned that it will need to take a hit of £600 - £900 million for PPI. This is in addition to the £5.3 billion that it has already has to pay out.

The bigger than expected payout comes at a time when RBS is still in the process of pursuing cost savings and comes just ahead of Brexit. RBS is facing more hurdles currently than we would have imagined a few years ago.

On a positive note the Q3 results, will be a line in the sand for the seemingly endless PPI scandal.

Alison Rose
The end of the fallout from the PPI scandal also sees a new RBS boss Alison Rose takeover from Ross McEwan. Alison Rose will be the first women to lead one of the UK’s top banks.

Brexit
Shares in RBS have surged 12% over the past month as Brexit optimism picks up. Domestically focused RBS is exposed to the ups and downs of the UK economy and the tos and fros of Brexit. With a no deal Brexit as good as off the table, and a line drawn in the sand over PPI the mood towards the bank is starting to improve. Any comments surrounding Brexit and the outlook for the bank will be closely watched.

Net Interest Margins
NII will be a major focus given the low interest rate environment and its impact on bank’s profit. RBS is the most sensitive bank in the UK to interest rates. Whilst NII is up 3% qoq, it is down 6% yoy.

Conclusion:

Whilst the RBS comeback story is playing out well, there remain significant headwinds from lower margins and Brexit related political uncertainty which could keep any recent gains capped.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.