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Is This Your Last Chance to Buy Royal Bank of Scotland?

By David O’Hara - Apr 8, 2013 at 12:56PM

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Despite the recent bad news, I still expect Royal Bank of Scotland to end the year almost 50% higher than it trades at today.

LONDON -- In one month's time, Royal Bank of Scotland Group (NWG -0.56%) (NWG -2.40%) will announce its results for the first three months of 2013. I expect that this announcement will be an important milestone in the bank's turnaround.

RBS shares have take a battering in the last month, falling 13%. After a great 2012, they are down a total of 16% so far this year.

RBS shares have suffered in the aftermath of the crisis in Cyprus. This was followed by the banking regulator announcing that it wants the sector to raise more capital by the end of the year. Bearish sentiments increased further this week as it was announced that investors would be suing the bank regarding a fundraising that it underwent in 2008.

Back in February, shares in RBS changed hands for more than 350 pence. I believe that a series of events is about to play out that could see RBS shares return to that level in May.

On 3 May, RBS will announce its Q1 results. I believe this could inspire new confidence in the bank and its ability to generate profits.

In 2012, RBS reported a 5.6 billion-pound loss from ongoing operations. This was a result of 5.3 billion pounds of impairment losses, 1.5 billion pounds paying for misdeeds and a 4.6 billion-pound accounting charge (ironically resulting from RBS's perceived rehabilitation).

If RBS can avoid further fines in 2013 and impairments continue to reduce at a similar rate, the company could report an operating profit for the full year of around 2.5 billion pounds.

At the end of 2012, RBS announced a tangible net asset value of 446 pence per share. That's a long way ahead of today's share price.

I believe profitable companies should not trade at a discount to their asset value. If RBS can convince the market that it will be profitable again, I expect that discount will narrow.

Furthermore, a profitable bank will likely be increasing its asset value. RBS's May statement could demonstrate that the bank's shares are currently too cheap by half.

While RBS' recent recovery has been considerable, analysts here at the Motley Fool believe that there is an even better large-cap growth share available on the market today. Despite this company's great success, it still trades on an attractive valuation. To find out more about this share and why our team have staked their reputations on it, get the free Motley Fool report "The Motley Fool's Top Growth Share for 2013." This report is 100% free. Just click here to get your copy today.

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