RBS shares: is it time to buy this FTSE 100 bargain?

first_img See all posts by Rupert Hargreaves Simply click below to discover how you can take advantage of this. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Image source: Getty Images. Enter Your Email Address Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. RBS (LSE: RBS) shares have plunged over the past four weeks. The stock, which has been struggling since the UK voted to leave the European Union in June 2016, has fallen 51% in 2020. By comparison, the FTSE 100 is off around 23% year-to-date. The question is, should investors make the most of this decline and snap up RBS shares today?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Time to buy RBS shares?Investors have been avoiding RBS shares since the financial crisis. The bank, which is still majority-owned by the government after its bailout, has struggled to turn itself around.It looked as if this was starting to change last year. RBS reinstated its dividend for the first time since the crisis in 2018. Then in 2019, management announced the bank would pay a special dividend.RBS was planning another special payout in 2020. However, the coronavirus crisis has thrown the bank and its peers off course. Regulators have ordered UK banks to put their dividends on ice for the time being. This is to preserve capital and strengthen the banking system in these extraordinary times.The good news is, RBS is in a much stronger position today than when it needed a bailout in the financial crisis.RBS’s fully loaded common equity Tier 1 ratio, a measure of its highest-quality capital, was 16.2% at the end of the first quarter. The ratio was just 4.5% at the end of December 2007. In the 15 years before the crisis, analysts estimated the bank’s capital ratio rarely exceeded 5%.In other words, RBS’s balance sheet looks to be stronger today than it has been at any other point in the past 25 years.Undervalued stockThe above implies that the lender will survive the coronavirus crisis in one piece. With this being the case, RBS shares look cheap after recent declines. The stock is currently trading at a price-to-tangible book (P/TB) ratio of just 0.4. This suggests RBS shares offer a wide margin of safety at current levels.However, it’s unlikely the bank will escape the crisis unscathed. Regulators are asking financial institutions to offer customers payment holidays, as well as flexibility around loan terms. This will reduce interest income in the short term. Nevertheless, from a long-term perspective, it seems a sensible decision.Payment holidays might reduce the lender’s income in the short term, but most borrowers should be able to resume payments when the crisis is over. If lenders take a hard line and don’t offer payment holidays, borrowers might have to declare bankruptcy. That would substantially reduce the chances of the debt ever being repaid.As such, while RBS might suffer a drop in income over the next few weeks and months, as one of the largest lenders in the UK, the bank is well-positioned to make a functional recovery when economic growth picks up again.On that basis, RBS shares could be an attractive bargain investment. Their current valuation suggests the stock could rise by more than 100% from current levels when the crisis is over.For risk-tolerant investors, it could be worth taking a closer look at the bank.center_img Our 6 ‘Best Buys Now’ Shares RBS shares: is it time to buy this FTSE 100 bargain? Rupert Hargreaves | Thursday, 9th April, 2020 | More on: NWG “This Stock Could Be Like Buying Amazon in 1997” I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.last_img

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