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The Royal Bank of Scotland Group plc Message Board

  • chandlerrambler chandlerrambler Sep 19, 2011 3:18 PM Flag

    RBS Preferred Shares - Series T

    I have not seen any discussion of these Preferred Shares issued in 2007. The Prospectus states that they will be treated as "non-innovative Tier 1 Capital and would be used "in part" to fund "additional cash requirements" to finance the ABN AMRO purchase. Doesn't this give them a higher status than the pure ABN Preferreds? I appreciate your collective advice. My broker bought significant shares in 2007 and I have watched with some trepidation.

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    • Warty writes "Jack, I'm looking forward to your Dow prediction." Let me second the motion and suggest Jack start a new topic (or thread - whichever is the correct term) with it. That is of course if he is so inclined.

      Personally I'm much relieved that the Dow has been able to close above the high of last May. One fly in the ointment may be the fact that the new high has not been confirmed by the DJ transportation index. For the "Bull" to remain intact I'd like to see that happen. Now even if the Bull is still intact, I could see a correction coming somewhere in the near to medium term.

    • "I can tell you, if it weren't for Scotch, the British Isles would not be inhabited in the winter time."

      Ha! I enjoyed that comment. I've been following the London weather lately and it looks like it's been mighty frosty.

      I spent two weeks in the heart of London in late August / early September. Hadn't been there for many years and was pleasantly surprised by what a great cosmopolitan scene London enjoys. The food was great -- met a lot of French people -- "Paris on Thames".

      It was a blast to walk around and see all the brick and mortar branches of RBS and National Westminster. Reassuring, in a way. I had an old £20 note from times past that I needed to exchange, so I walked into a NatWest branch near Soho and enjoyed a nice conversation with a young lovely. "What's it been like, working at NatWest over the last few years?" "Well, we've had our ups and downs, but it's a great place to work, and I'm pleased that we seem to have found our way forward."

      It's nearly time for the Nightly Business Report here in Seattle (how I miss Paul Kangas!) -- and that means a martini can't be too far behind.

      Cheers all -- it's been a great year to hold RBS prefs so far! Jack, I'm looking forward to your Dow prediction.

      /warty

    • 2011 was ugly for anyone in anything Greek. But, I was able to do the 30 day swing trades and cash in all my gains on AFF and RBS-L offset by losses in NBG-A. Have bought back to the same holdings with a lot higher basis in the AFF and RBS-L with a lot lower basis in the NBG-A.

      I will hold the AFF and RBS-L for the long term, I only want the income as part of a retirement plan, so it was a tax blessing to be able to do the swap and not have to worry about a tax bomb if I have to sell the AFF or RBS-L.

      Just returned from a month in London (second time in the past year) and I can tell you, if it weren't for Scotch, the British Isles would not be inhabited in the winter time.

    • On the nbgpra's, I will not take an offer below $8, and then will hold over 50%. If the offer is $9 (IF) or higher, then I will adjust.

      Was going to roll into rbs g,e,i's on some but I am not confident these will pay next year. RBS NV will be taking another hit on Greece, and I need to look at RBS NV financials closer (like after the annual is out).

      Market on a roll. If they bail Greece out, should continue for a bit, though I'm not too confident for the rest of the year. It just strikes me that I've not done my usual annual guesstimate for the Dow; this I posted here the last couple years and was pretty decent on my guesses.

      cheers,

      jack

    • Yes, I did lighten up, and I see it looks like it is costing me. I actually added some back today -- and that is wild speculation as next week it could turn down again. And ugly year for me as I was quite overweight in nbga's with the intent of swing trading.

      Greece. Scary. Dynamics all following Murphy's Law.

      cheers,

      jack

    • Jack,

      I had to wait until the NW-C had recovered in price to say thanks for the good word. Did you say you lightened up on the NBG-A? I'm holding steady, but did take some tax losses last year. Finding yield is making me go really far out on the risk scale. I don't like Reits or LPs so about all I'm finding in these european banks.

    • That notice was given in April, dated before the stress in the funding markets that started in August and which still continues. Take more weight on the RBS November fixed income Q&A, regarding what outlook needs to be acheived for a divy reinstatement. It was not as much of a slam dunk as it was in April and the deterioration in macro definitely increased risk. Two key things I saw from that Q&A, 1) bank funding markets have to return, and 2) the macro sentiment does not lead into contagion ala increased increased credit losses in Ireland and UK.

      Macro seems very esoteric but is indeed relevant, as it causes a negative feedback loop - banks cant fund, need to deleverage or sell assets, reducing risk appetite and hindering the European economy, causing increased credit losses (especially in Ireland given its rebound is export oriented to the Euro region, and where RBS is heavily exposed), and higher capital requirements.....

      I think RBS will be ok, but I remain vigilant on any changes in the area and I try to minimize any tail risk that isnt outweighed by the reward.

      By the way in that report, one statement you left out in Moody's statement is that their rating is dependent on continued support by the parent, which I believe is probable, but far different than an assumption of liability.

    • JJ, with regard to additional deferral's of RBS.NV capital trust issues please consider the opinion of Moody's in 4/2011,

      "Tier 1 securities: B3(hyb) rating is affirmed and the outlook changed from negative to stable to reflect the fact that we no longer consider there to be a meaningful likelihood of the coupon omission period being extended beyond that initially proposed and recently approved by the EC."

    • Agreed as well. I think the point of my post was not to say they were going to bk the sub. I was merely pointing out additional tail risk that needs to be considered in the ABN preferreds versus the RBS Group preferreds. Analagous to the BAC/Countrywide considerations. Of course if we ever get to that point, which I don't think we will otherwise I wouldnt be invested in RBS, I can probably guarantee further deferrals (impairment) on all preferreds, not just the RBS NV.

      RBS intends and the "relevant" credit rating agencies agrees, that RBS NV will continue to have support from the parent.

      In fact, RBS NV preferreds may actually be a good investment relative to the Group preferreds if you can tolerate risk and think that the dividends will be pushed another year until the commons get their dividends in 2013. If you think the credit crisis won't go away in 2012, then there is likelihood of coupon deferral in those coming due June 2012. However, given RBS NV's deferral ends in 2013, you can say there is some capital safety in those given its already discounted for an extended year of deferrals relative to the Group preferreds.

      From my perspective, I think institutionals who needs to show performance look only for investments with carry. Hence why these are all so cheap. Once they start carry, I think you will see the initial pop, then gradual price normalization. (Which is why the RBS NV may lag in price performance relative to RBS Group preferreds in 2012).

      The million dollar question is what is a normal price. I doubt these will go back to par. Historically, yankee preferreds trade at a 25-50 basis point discount to US bank preferreds. US bank preferreds traded at unsecured seniors + spread of 150-200 basis points. With the unsecured seniors widening due to market stress and regime changes ("bail-in debt"), the seniors will likely be lower duration, have higher convexity (on credit and rates) and higher spreads, which all will definitely influence the subordinate structures with long duration (IE tier 1s). My price target on the T's is probably low 20's.

    • good points all.

      I actually do think that RBS must have some concern about potential liability for these preferred shares. And completely agree they are not leaving RBS NV with intent of its failure.

      jack

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