Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US) is one of the largest companies in the FTSE 100 and many private investors have differing opinions about the bank and its prospects.
So here’s a quick rundown of the key reasons why you may wish to buy, sell or simply hold on to the company’s stock.
Buy
Many RBS bulls cite the bank’s 445p per share book value as the main reason to buy.
At 335p, the share price would have to rally 33% to join fellow state-backed bank Lloyds Banking and trade above its balance-sheet value.
Another reason to buy is the government being keen to realise a profit — or not realise a loss — on its RBS investment. The taxpayer is essentially in at about 440p and the Treasury apparently wants a sale before the end of next year.
Hold
Still, book value isn’t everything. Barclays for instance has long traded below book value, but that did not stop it from announcing a near-£6bn rights issue to shore up its accounts.
What’s more, RBS and the wider banking sector are not completely out of the woods when it comes to getting back on a firm footing.
Nonetheless, the industry seems to have passed the worst and many long-term holders perhaps have little to lose given the 2008 share-price collapse.
So simply holding on for a few more years and hoping for the best might well be the best road for many.
Sell
How many reasons do you need?
The complex accounts, the lack of consistent profits, the lack of foreseeable dividends, the shrinking asset base, the possibility of requiring more capital, the political interference, the appointment of a new chief executive, the prospect of greater regulation… the bears have no end of ammunition here.
So why not just sell up and reinvest in something more predictable, less complicated and much more likely to give you a decent return and no sleepless nights? You know it makes sense.
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> Maynard does not own any share mentioned in this article.
