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The Royal Bank of Scotland Group plc Message Board

  • barrel.denis barrel.denis Apr 30, 2013 5:04 PM Flag

    RBS-I - price if dividend resumes

    Can anyone give me his/her views as to the yield to expect if dividends resume on the RBS-PI (they currently "yield" 6.8% at the closing price of $22.21.). Also, I wld be interested in how you get to yr estimate.

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    • The question of yield depends upon how RBS handles G. I and E on Friday. There are several possiblities: (1) a simple resumption of dividend; (2) a buyback b/c these trust preferreds will be phased out as tier one capital by 2019 (not a likely scenario); (3) according to the prospectus, RBS does have the right to convert these trust preferreds to a non-cum perpetual preferrred carrying same prority status as the trusts (not sure what time frame required). Predicting the yield depends whether they will retain trust status . In general, trust preferreds carry a 1% lower yield b/c of higher priority/safety. Given that current RBS regular preferreds have a yield a bit above 7% (even with their recent runup), it is certainly possible that RBS.I (coupon of 6.25%) might get between 24-25. The strong move in the last couple of days (RBS.I closed at 22.40 today) would indicate the market thinks there is growth coming.

      • 1 Reply to bballbarney
      • bballbarney - thanks for yr views. I see RBS-L is yielding 6.2% - which implies a price of $24.50 for rbs-i. But RBS-L is based on assets generated by RBS, whereas RBS-I is based on ABN-Amro generated assets. The ABN assets seems to be running large losses - so there seems to be some risk that the RBS-I's may not resume the dividends (or might be stopped at some point). My guess is that the price of the i's if dividends resume probably goes to about $23.00, for a yield of 6.5% or so. Do you agree that the preferreds based on the abn-amro assets will trade at higher yields than the preferreds based on the RBS assets? thnx

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