Royal Bank of Scotland Now a Strong Buy - Analyst Blog

By Zacks Equity Research,

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On Jun 6, Zacks Investment Research upgraded The Royal Bank of Scotland Group plc ( RBS ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The rank upgrade of this U.K.-based bank was driven by strong estimate revisions on the back of impressive first-quarter 2014 results.

On May 3, Royal Bank of Scotland declared its first-quarter 2014 results. Profit from continuing operations came in at £1.28 billion ($2.12 billion), rising more than twofold from £476 million ($739.4 million) in the prior-year quarter.

Results benefited from lower loan impairment losses, reduced operating expenses and higher net interest income. However, reduced non-interest income was the downside.

Further, management anticipates a modest increase in the net interest margin in the upcoming quarters given the ongoing economic recovery in the U.K.

Margins are expected to be slightly up and strategic initiatives to result in cost reductions and improve efficiency in 2014. While full implementation of these actions will take two to three years, management anticipates the underlying cost base to be lower by £1 billion in 2014.

Given the strong first-quarter results as well as the outlook for 2014, analysts' bullish stance is reflected in the stock. The Zacks Consensus Estimate for 2014 advanced significantly from 27 cents per share 30 days ago to 61 cents today.  Also, for 2015, it moved north 25.0% to 65 cents per share.

Other Stocks to Consider

Other stocks in the foreign banks space worth considering include Australia-based Australia & New Zealand Banking Group Ltd. ( ANZBY ), Argentina-based BBVA Banco Franc ( BFR ) and Spain's Bankinter, S.A. ( BKNIY ). All three stocks hold the same rank as Royal Bank of Scotland.

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: RBS , ANZBY , BFR , BKNIY

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