1 Bank Aggressively Pursuing Retail

Banks everywhere have begun to consider the value of their retail operations -- yet one bank's CEO recently announced it would be aggressively charging into the retail business.

Ross McEwan, the newest head of the Royal Bank of Scotland (NYSE: RBS  ) , was installed as CEO of the floundering bank, which is still 81% owned by the British government, on October 1 of this year. 

During his first day on the job, as reported by Dealbook, McEwan highlighted in a speech to employees that he wanted the bank to be "absolutely customer focused." In addition, he noted; "It is important to me that we rebuild the pride of this organization, we rebuild the connection with our customers and we repay the U.K. for the money and the faith they put in us. We are such a big part of this economy. We need to take our place in it."

That vision has already begun to come to fruition and was highlighted in a recent presentation at the Bank of America Merrill Lynch Banking & Insurance Conference. It was there the bank noted it had reallocated its assets in its commercial and retail banking unit from 44% in 2008 to 65% in 2012. In addition, the most recent quarter was the first quarter since 2008 in which the bank posted consecutive quarterly profits.

So the natural question becomes -- is RBS making the right move by charging into retail? One quick check of their most recent earnings reveals something rather staggering:

RBS Return on Equity by Business


Q2 2013

Q1 2013

Q2 2012

Total Company




U.K. Retail




U.K. Corporate




Wealth Management




International Banking




Ulster Bank




U.S. Retail & Commercial








Source: Company Earnings Report.

As you can see in the chart above -- it is not simply an appeal to the national consciousness or some ill-planned ambition, but it is the move that makes the most business sense. It is plain to see that RBS aggressively pursuing its retail franchise should lead to strong returns for its overall business.

RBS saw its total income attributable to its retail business rise by 4.5% through the first six months of 2013, yet it is a little troubling when compared to Lloyds Banking Group (NYSE: LYG  ) , which saw its retail income rise by 11%. However since it is delivering greater raw returns, that may not necessarily be a bad thing.

While RBS trails currently trails peers HSBC and Barclays, who have returns on equity of 12% and 7.8%, respectively, if it continues to pursue its U.K. retail franchise and deliver great results, investors could see the benefits from this stock.

Banks delivering on promises
Have you missed out on the massive gains in bank stocks over the past few years? There's good news: It's not too late. Bargains of a lifetime are still available, but you need to know where to look. The Motley Fool's new report "Finding the Next Bank Stock Home Run" will show you how and where to find these deals. It's completely free -- click here to get started.

Read/Post Comments (1) | Recommend This Article (2)

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.

  • Report this Comment On October 13, 2013, at 3:55 PM, MFUN4 wrote:

    Seems like RBS stock will do much better when they resume dividend payments, too, and this and a Citizen's sale to TD won't hurt that possibility.

Add your comment.

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: 2674541, ~/Articles/ArticleHandler.aspx, 9/30/2016 11:30:42 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 2 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

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

9/30/2016 4:00 PM
LYG $2.87 Down +0.00 +0.00%
Lloyds TSB Group CAPS Rating: ***
RBS $4.66 Up +0.16 +3.56%
Royal Bank of Scot… CAPS Rating: ***