Will Royal Bank of Scotland (RBS) Rally Post Q1 Earnings?

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The Royal Bank of Scotland Group plc RBS is scheduled to report first-quarter 2018 results on Apr 27.

Last quarter, the company posted a loss. Results were hit by lower margin and non-interest income.

Driven by gradual improvement in the macroeconomic backdrop, shares of the company gained 4.6% on the NYSE over the past six months, outperforming 0.73% growth recorded by the industry it belongs to.

Royal Bank Scotland PLC (The) Price

Royal Bank Scotland PLC (The) Price | Royal Bank Scotland PLC (The) Quote

RBS, which was bailed out with £45 billion by the British government in 2008, has been striving for growth with several restructuring initiatives. These include cost-reduction measures, reduction of geographic footprint and capital build-up efforts, while remaining focused on its strategy to become a smaller and simpler bank.

The bank's ability to cope with broader industry challenges amid its overhauling moves remains a key area to watch this earning season. So, will the upcoming earnings release lead to further improvement in RBS' share price? Let's check out the factors that are likely to affect the results.

Factors to Impact Q1 Results

This Edinburgh-based banking giant experienced decline in net fees and commissions in the recent quarters, and we do not expect it to display substantial strength in the quarter to be reported. The company has downsized its investment banking division, which is likely to witness a decline. However, the bank's revenues from advisory are expected to have recorded significant improvement, as M&A activities were strong during the quarter.

As the bank remains focused on expediting its ongoing overhaul, the quarterly results will be affected by further significant restructuring charges. Also, given RBS' exposure to numerous lawsuits and investigations, the company might have kept additional reserves for litigation expenses, which might dampen the bottom line to some extent.

However, the expense base may get some respite owing to RBS' continued cost-control efforts. In addition, the company might have benefited from the ongoing economic recovery (albeit at a slow pace) in the U.K. and Ireland - the major domestic markets.

Furthermore, net interest margin is expected to have increased partially, reflecting the continued benefit from reductions in the low yielding non-core assets.

Currently, RBS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Among other foreign banks, Mitsubishi UFJ Financial Group, Inc. MTU , Itau Unibanco Holding S.A. ITUB and Deutsche Bank AG DB are scheduled to report results on May 15, May 1 and Apr 26, respectively.

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Deutsche Bank Aktiengesellschaft (DB): Free Stock Analysis Report

Royal Bank Scotland PLC (The) (RBS): Free Stock Analysis Report

Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis Report

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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 , Earnings , Stocks
Referenced Symbols: DB , RBS , ITUB

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