Do Today’s Updates Make Royal Bank of Scotland Group plc And Aberdeen Asset Management plc A Buy?

What do investors need to know about today’s updates from Royal Bank of Scotland Group plc (LON:RBS) and Aberdeen Asset Management plc (LON:ADN)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Do the trading updates released today by Scottish financial groups Royal Bank of Scotland Group (LSE: RBS) and Aberdeen Asset Management (LSE: ADN) strengthen the buy case for these battered financial stocks, or should you stay away?

Aberdeen Asset Management

Shares in fund manager Aberdeen Asset Management have fallen by more than 50% from last year’s peak of 509p reached in April. Is this stock now cheap enough to buy or are further falls likely?

Today’s trading update suggests a mixed picture. Net outflows during the final quarter of 2015 were £9.1bn. While disappointing, this is 28% less than the net outflow of £12.7bn reported for the third quarter of last year.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Continued outflows do seem likely, as wealth funds in oil-rich emerging markets continue to liquidate their holdings in order to raise cash. But despite the volatile market conditions, the value of Aberdeen’s funds under management rose slightly during the fourth quarter. A mixture of investment gains and favourable exchange rate effects helped increase assets under management from £283.7m to £290.6m.

A final point worth considering is that recent press reports suggest that Aberdeen founder and chief executive Martin Gilbert is discreetly sounding out potential buyers for the firm. A trade sale could be profitable for shareholders at current share prices.

Aberdeen shares currently trade on a forecast P/E of about 10 and offer a potential yield of 8.5%. Such high yields are often unsustainable, but last year’s results suggest to me that Aberdeen probably will be able to maintain this payout. I suspect that Aberdeen could be a profitable long-term buy for investors who can accept the risk of further short-term losses.

Royal Bank of Scotland

Just when RBS was starting to look like it might be on the road to recovery, the bank has surprised the market with news of up to £3.6bn of exceptional charges.

The biggest of these involves a change in pension policy that will reduce RBS’s net tangible asset value by £1.6bn. In its trading update this morning, RBS also announced a £1.5bn provision to cover mortgage-related litigation claims in the US, and another £500m to cover PPI compensation payouts in the UK.

The net result of these charges will be that RBS’s net tangible asset value falls by 30p to 350p. The bank’s CET1 capital ratio, a key regulatory measure, will also fall, from 16.2% to about 15%.

Although this isn’t great news, it’s not necessarily a big problem for value investors. A CET1 ratio of 15% is still well above the 10% threshold considered safe by the market.

Similarly, the bank’s current share price of around 250p also means that the shares still trade at a 28% discount to their latest tangible net asset value of 350p. A generous discount to net tangible asset value is often seen a key buying signal for value investors.

Given that RBS trades on an affordable forecast P/E of 10, this discount suggests to me that the bank could still be an interesting value buy for investors with a three-to-five-year timeframe.

British CEO gobbles up £238,000 of own stock

What company does he run?

And why is he so confident in its long-term potential?

This new report - ‘One Top Growth Stock from The Motley Fool’ - reveals the full details, both risks and opportunities. Some of which you may find frankly, unbelievable.

Though past performance does not guarantee future results, over the past 5 years, it’s seen consistent:

  • Double-digit revenue growth
  • Returns on capital almost 600% the UK average
  • Now, profits are exploding again - up 46% in 1 year!

It’s no wonder insiders are buying this stock hand over fist. Last year, they bought a total £492,000 of shares. And now might be the ideal moment to join them.

So please, don’t miss this report, ‘One Top Growth Stock from The Motley Fool’ Including both risks and opportunities.

Secure your FREE copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

2 reasons why this stock market crash isn’t a repeat of 2020

When the stock market crashed during the Covid-19 pandemic, the recovery was rapid and spectacular. Could the same thing happen…

Read more »

Investing Articles

Car-mageddon! The Aston Martin share price has tanked 30% in a month

Our writer looks at the performance of the Aston Martin share price over the past few weeks and considers whether…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing For Beginners

I was right about the UK stock impact from the tariff news. Here’s what I think happens next

Jon Smith explains why he warned about the impact of the tariffs on UK stocks and why more short-term pain…

Read more »

Investing Articles

Looking for penny shares? Here’s one I think looks like a terrific bargain to consider!

I think this penny share -- which has almost doubled in value over the last year -- is one of…

Read more »

Investing For Beginners

Why I’m staying away from the Barclays share price even with a 19% drop

Jon Smith explains why he's cautious right now about the Barclays share price, with the potential for lower revenues from…

Read more »

Investing Articles

2 FTSE 100 and FTSE 250 stocks to consider as stock markets plummet!

Looking for lifeboats as growth-crushing trade tariffs loom? Here are two (including a FTSE 100 gold stock) I think merit…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Watches of Switzerland shares 1 year ago is now worth…

Watches of Switzerland shares have been decimated by Trump’s tariffs on Switzerland. Dr James Fox explores whether this is an…

Read more »