Should you buy Royal Bank of Scotland Group, Lloyds Banking Group plc or Metro Bank plc after this week’s results?

Three banks have reported results this week, but are any worth adding to your portfolio?

| 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.

Royal Bank of Scotland (LSE:RBS), Lloyds Banking Group (LSE: LLOY) and Metro Bank (LSE: MTRO) have all reported results this week, but which company, if any, looks an attractive buy right now?

More one-off costs at RBS

RBS reported an adjusted quarterly profit of £1.3bn this morning, although a combination of one-off costs, including misconduct fines, restructuring cost and tax resulted in a loss of £469m, nearly double market predictions.

The report contained more bad news for shareholders, with the bank confirming that it will likely miss its deadline to sell three hundred branches under the Williams & Glynn brand by the end of 2017, which it  was ordered to do by the EU as part of the bail out provided in the financial crisis. The consequences of missing this deadline are currently unknown – and if there’s one thing the market doesn’t like its uncertainty.

The bank’s cost-to-income ratio — a measurement of how much it costs to generate each pound of revenue — was poor at 88%, a far cry from the target of 50%.

The adjusted number comes in at 58%, although I find it hard to value RBS using its adjusted figures. It has booked enough “one-off” charges that I consider them a cost of doing business. With so much uncertainty hanging over the bank, I’m not sure I’d feel comfortable investing.

Dividends incoming at Lloyds?

Lloyds was forced to put aside a further £1bn to cover expected PPI settlements this quarter, because the deadline for people to claim has been extended to 2019. Thankfully, the bank expects this to be the last large lump sum it will dedicate to the issue. Maybe that means our TV’s will be free of those awful adverts soon, too.

Lloyd’s expects its cost-to-income ratio for the year to be below last year’s 49.3%, an impressive result to be sure, especially when compared with RBS.

The company trades on less than eight times predicted earnings for this year, so it seems much of the above uncertainty is baked into the share price. Combine this with a forecast 6% yield next year and Lloyds starts to look attractive.

Metro Bank Opens Record New Accounts

Metro Bank came ever so close to recording a maiden profit this quarter, and did so on an underlying basis. Once the cost of listing is ignored (and that is a fair one-off cost to ignore, in my view) the bank swings from a loss of £0.24m to an underlying profit of £0.6m.

Deposits in the quarter jumped 66% to £7.3bn, while lending increased to £5.2bn, a 73% gain.

Impressively, growth seems to picking up too. The company opened a record 68,000 new customer accounts in the quarter, for a total of 848,000.

In summary, I’d avoid RBS after the increased uncertainty in its results, although both Lloyds and Metro look attractive, the former for income and the latter for growth.

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.

Zach Coffell has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »