Valuing RBS Post Largest Loss Since 2008

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Feb. 27 (Bloomberg) -- Otto Dichtl, Managing Director at Stifel Nicolaus Europe, discusses the problems at RBS and what that means for investors. He speaks on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Mcewan is saying the bad news is going to continue.

He is trying to reform an institution that is massive and unwielding.

It is going to take an awfully long time.

I'm not is that your the end as a result something you necessarily want to buy into either.

I think that is probably summing up the reason why the shares have dropped so much this morning.

It is kind of lacking a kind of a spark.

It is lacking a bit of a vision, if you like, that is exciting for investors and i guess the question now is more well, with an emerging, solid, steady lower risk, the u.k. retail bank, effectively.

At what point is it cheap enough basically that you buy effectively sort of a steady -- how do you value that?

What would be the right metrix to look at, a boring, dull, utility bank that operates out ott u.k.. what are the nearest comparisons?

Well, sloids a very close comparison -- lloyds is a very close comparison in that respect.

They are much further along in the process.

Already starting with significant dividend payout stream.

R.b.s., given what they presented today, maybe a bit further behind lloyds in that process and people had hoped for before today's news and therefore the big discount.

Again, lloyds, on the other hand, the evaluation quite rich really if you look at it.

Investors seem to price this sort of solid dividend story quite highly.

Maybe over time, that is what r.b.s. could sort of aim for prsmr how do i price political risk?

How do i think about that?

Another set of numbers that are pretty disappointing, a big bonus pool, the income ratio that is still stratospheric compared to the targets where mcewan wants to be.

How do i, if i have r.b.s. shares, think about that risk.

At some point, once again, the politicians are going to get involved.

Yeah, i think it is probably part of the valuation and part of the story.

As we said, you know, it seems like management is almost sort of beholden to this sort of slightly political story of oh, we'll pull back from everything outside of the u.k. somehow, bad and evil and risky and whatever and we only want to be in the u.k. and the broader u.k. economy, if you like.

You know, given that involves a lot of shrinkage now and once it is achieved, there is sort of the lack of any kind of growth story, a lack of a spark if, you like in that respect and i think that is to a good extent related to the political situation.

Just very briefly, the capital situation, they are showing a lot of assets.

It doesn't look as -- as you may think.

There are things you don't know about.

Also whether or not actually given all of this, there isn't maybe a need for more capital potentially further down the road?

Yes.

Again, i think that is weighing on the evaluations this morning a bit.

It is correct.

Lloyds -- r.b.s. has outlined a whole number of asset sales.

Citizens probably being the most important and biggest one.

Yet basically what they are telling us is in three years, we will have basically the same am of capitaled a we have today.

Essentially all the money they are raising from sales and maybe eventually from profits goes somewhere else.

Given that dividend also probably be -- remain quite low, you to wonder is it litigation, further restructuring costs?

All the things that don't raise evaluations.

Ok.

we'll leave it there.

Thank you very much indeed.

This text has been automatically generated. It may not be 100% accurate.

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