Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The 2013 Outlook for Royal Bank of Scotland

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

LONDON -- In this festive mini-series, we look at the 2013 prospects for some of your favorite FTSE 100 (UKX) shares. Today, it's the turn of Royal Bank of Scotland Group  (LSE: RBS  ) (NYSE: RBS  ) .

RBS' shares have gained 50% during the course of 2012 compared with a 6% rise for the Footsie. RBS's gain isn't as impressive as Lloyds'  (LSE: LLOY  ) +81%, but it's a tasty increase all the same.

Like Lloyds, RBS has been working hard to make itself safer and stronger. The company described progress on its restructuring programme as "excellent" in a Q3 statement released in November, which suggests the big rise in the share price this year is not without justification.

Notable events in recent months include the successful flotation of Direct Line Insurance Group, which raised 911 million pounds, and RBS' exit from the Government's Asset Protection Scheme, demonstrating the group's progress in building a more robust and stable balance sheet.

Less welcome news was Santander U.K.'s decision to pull out of an agreed purchase of 316 RBS branches, the sale of which is required by the European Commission. However, RBS is commencing a new process for the disposal, and shareholders can expect to hear more about this in 2013. Scheduled news releases for the year kick off with annual results in February.

RBS has clearly made good progress on its strategy of reducing its non-core assets and de-risking its balance sheet during 2012. But, after the 50% rise in the share price, how does the stock valuation look now, and have the shares got further to go in 2013?

At a recent share price of 302 pence, RBS's 12-month forward price-to-earnings (P/E) ratio of just over 10 represents no cheaper an earnings rating than more solid banking citizens HSBC and Standard Chartered.

However, as with Lloyds, RBS looks a lot better on an assets-valuation basis relative to HSBC and Standard Chartered, which are both trading at a premium to tangible net asset value (TNAV). In fact, RBS also looks better relative to Lloyds on this basis.

RBS started 2012 on a 60% discount to TNAV, while Lloyds began the year on a 56% discount. Because RBS' shares haven't soared as spectacularly as Lloyds', RBS is currently on a discount to TNAV of 37%, compared with Lloyds' now much narrower discount of 17%.

These numbers would suggest there's more scope for RBS's discount to close further than Lloyds' in 2013 -- by way of its share price rising higher if conditions in the financial markets remain reasonably benign.

However, conditions may not remain reasonably benign, and if you have your doubts about the macro-climate, you're in good company. City super-investor Neil Woodford, who famously got out of financials before the credit crunch, is still steering clear of banks. Woodford's funds have trounced the market over the past 15 years, so his views and approach to investing are certainly worth considering.

You can do exactly that by helping yourself to a free and exclusive Motley Fool report that tells you all about the master investor's enormously successful strategy and eight of the blue-chip companies he currently favors in these uncertain times.

This report is free to private investors for a limited time only, but it can be in your inbox in seconds: Simply click here.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2170150, ~/Articles/ArticleHandler.aspx, 10/20/2016 5:38:54 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:01 PM
RBS $4.60 Up +0.12 +2.68%
Royal Bank of Scot… CAPS Rating: ***
RBS $183.62 Up +3.62 +2.01%
Royal Bank of Scot… CAPS Rating: No stars
LLOY $55.55 Up +0.68 +1.24%
Lloyds Banking Gro… CAPS Rating: No stars