Results to 31/03 are out today on this share which is in the value portfolio. As I've mentioned before, the interesting fact about the always massively prolix RBS accounts is that they publish their net tangible assets per share figure. A most unusual thing for a company to do. Even those that do publish it, and they are most likely to be in asset based businesses like property, will very rarely show net tangibles but just net assets including intangibles.

"Tangible equity" as they call it is now 48.8p, down slightly from the 50.1p at 31/12/11 but it remains well over the share price which is now just over 25p.

This is the sole value attraction of RBS but it's a powerful one in my view for the very patient. There's nothing else of a value nature. It makes losses, pays no divis and as a bank will always be highly indebted.

PYAD,

Agree on the asset point, but RBS is also forecast to return to profitability. Divis should follow in time.

I am using the Tier 1 ratio as a proxy for debt and they have managed to boost this a little and it is in line with the other UK banks.

If RBS was forecast to keep on making losses, with no credible turn around strategy, the discount to assets alone would not be enough for me.

I've got a few of these.

MV

the interesting fact about the always massively prolix RBS accounts is that they publish their net tangible assets per share figure

Barclays also report net asset value per share and are standing on a similar ish discount to NTAV if the figures quoted are to believed.

? Net asset value per share of 445p (31 December 2011: 456p) and net tangible asset value per share of 381p
(31 December 2011: 391p) impacted by the own credit reversal
current share price is 210p


http://group.barclays.com/cs/Satellite?blobcol=urldata&b...

without doing any great research Barclays appear to be the more profitable bank are paying a dividend and don't have the "future sale of the government stake" issue hanging over the shareprice.

On the face of it to me if the accounting policies are similar then Barclays appears to be the less of a basket case investment of the two but i have heard mention before that they may use more aggressive accounting techniques - if this is true then perhaps this may explain why Barclays is at a similar discount despite appearing more profitable.

I don't own any bank shares at present but as time goes on and the discount to book value remains it seems less likely that a large elephant will jump out the closet and squash the boardroom table and assembled directors - thats presuming everything doesn't go wrong with the euro - which it may well do.

Any thoughts as to others opinions on which bank is best value play would be most appreciated.

...If RBS was forecast to keep on making losses, with no credible turn around strategy, the discount to assets alone would not be enough for me.

I agree. I'm just making the point that the tangible asset discount is the only value criterion, reinforced very unusally by the company publishing the figure.

Naturally their drive to return to profits and dividends is part of the story for investors but those aren't value facts, rather just hopes at this stage whereas the asset situation is a reality now.

Put another way, I don't think I'd see it as a value play at all on recovery hopes alone if it wasn't supported by the big asset discount.

...Any thoughts as to others opinions on which bank is best value play would be most appreciated.

Who knows for sure?

As you say, Barclays is at least paying a small dividend and stands at a similar discount to tangible book. So it's probably a decent play.

But my guess is that RBS has far more upside simply because it is far more trashed. And I don't see the government holding as a negative influence.

They're not mutually exclusive so one could buy both.

And I don't see the government holding as a negative influence.

Me neither. It will be a very, very brave government that sells its stake at a loss. Politically this would be dynamite. That's why I thought the recent deal floated in the media that Abu Dhabi would buy a stake well below the government's entry price would not fly.

It seems likely that the government's stake will be sold as a placement to institutions, possibly including the Abu Dhabi sovereign wealth fund. If there is enough positive publicity about RBS, then the stakes could even be sold to retail investors.

Another scenario which will be politically embarrassing is if the government sells stakes to institutions which then sell them on at substantially higher prices to retail investors.

The issues here are so fraught and so political, that any sale is going to be timed somehow around elections. Depending on the economy, the middle of the next parliament looks like the time for this to unfold with the stakes being sold towards the end of the next parliament. This is total speculation on my part, but I'm just trying to get a feel for what the players involved in this are likely to engineer.

What is almost certain, is that there are various memos floating around the treasury on how to pull this off. I am sure that the above scenarios have been considered as well as many others (e.g. a complex transaction where the government sells some shares, but retains others and warrants so it can benefit from any price increase). It would be lovely to have an idea what ministers and senior public servants think!

I keep wondering whether and when to invest in RBS.

Today's results talked of Return on Equity of 11%, and commentators (for what little its worth), think 9% RoE. Keep it Simple, Stupid is a good mantra for value investors, so what's the message from todays results and comments?

First, there's a generally negative vibe around RBS. That's a positive to a value investor. Second, the Nav, is declining, as management gently deflate the overstated company asset value. (I mean if RBS claims to make around 10% on around 50p, an NAV is STILL declining, then all profits are hypothetical.)

Sooner or later the tide will turn. Even if NAV declines to 40p and there's an eventual 10% return on that figure, it looks good value against a present 25p share price. There's a realistic prospect of an investment now nearly doubling in value, yet I'm still not tempted.

Why? In a word, patience. I just don't like the idea of non-dividend paying dead-money for a couple of years, not with other opportunities out there. The key is not to become fixated that RBS is a 'bad' investment. As time passes, is increasing. So perhaps in 12 months, 24 months time it will be a far more attractive investment, even if that has to be made at 30p or 35p.

Me neither. It will be a very, very brave government that sells its stake at a loss. Politically this would be dynamite.

Even though selling at a profit is the equivalent of imposing a tax on the nation. It always amuses me when I hear commentators complaining about high tax burdens on one hand, but desperate to make sure that RBS is sold at a profit on the other.

The biggest risk I see is full nationalisation, which is likely to mean those assets disappearing for a song and likely at the market price at the time.

In that respect Lloyds is less of a risk

NeilW

RBS, BARC & LLOY all stand at big discount to tangible assets. My own approach is to create a mini portfolio of these, without going in particularly big in any of them, as there are risks but perhaps substantial returns.

My personal view is that they will all come good in time, though there is not a clear winner. BARC is maybe the less risky. All are likely to be volatile shares to hold and could go way down on the current prices, so buyers need to be able to stomach this.

Regards,

MV