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The Zacks Analyst Blog Highlights: Royal Bank of Scotland Group, Barclays, Deutsche Bank, U.S. Bancorp and CVB Financial

Zacks Equity Research

For Immediate Release
Chicago, IL – May 29, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Royal Bank of Scotland Group plc (RBS-Free Report), Barclays PLC (BCS-Free Report), Deutsche Bank AG (DB-Free Report), U.S. Bancorp (USB-Free Report) and CVB Financial Corp. (CVBF-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday’s Analyst Blog:

Royal Bank of Scotland to Axe U.S. Jobs

In the wake of heightened U.S. regulatory pressure on foreign banks, The Royal Bank of Scotland Group plc (RBS-Free Report) is set to eliminate more than 300 employees in its U.S. trading operations over the next 18 months. Notably, the layoffs will take place mostly in the mortgage business.

Royal Bank of Scotland is streamlining its trading operations in Stamford, CT, where it had a significant size of trading floor. This initiative is a part of the company’s efforts to control cost and emphasize more on the domestic market. The company proposes to reduce around two-thirds of its total U.S. employee base of 2,400 by 2015. This will be in sync with downsizing the mortgage-trading business and distressed-loan-trading operation.

The Federal Reserve’s newly proposed rules will require foreign banks, with a minimum of $50 billion in assets in U.S. divisions, to maintain higher capital levels and undergo stricter stress tests. Perhaps, Royal Bank of Scotland is offloading its U.S. assets in order to avoid the compliance of the rules. The company plans to reduce its risk-weighted assets by around $10 billion by the beginning of 2015 in order to reduce its asset level below the $50 billion limit.

A number of foreign banks including UK-based Barclays PLC (BCS-Free Report) and German player Deutsche Bank AG (DB-Free Report) are under strict vigilance by the U.S regulators as they believe bigger trading operations by the units of foreign banks in the U.S. could lead to another financial crisis and involvement of taxpayers’ money.   

The downsizing should not come as a surprise to investors as Royal Bank of Scotland, which was bailed out with £45 billion by the British government during the financial crisis, is striving for growth with its cost reduction initiatives, increased focus on markets where it has a strong presence and long-term growth prospects.

Royal Bank of Scotland is already in the process of scaling back its U.S exposure. Notably, in Jan 2014, the company announced the vending of its U.S. retail business – Charter One Bank (owned by its division RBS Citizens Financial Group) – to U.S. Bancorp (USB-Free Report). The company proposes to fully offload its stake by 2016.

Further, in February, Royal Bank of Scotland announced that it would sell certain assets and liabilities in its Structured Retail Investor Products & Equity Derivatives to Paris-based BNP Paribas SA. This move comes as part of its strategy announced in Jun 2012 to reduce its equity sales and trading operations.

Currently, Royal Bank of Scotland holds a Zacks Rank #3 (Hold).

CVB Financial Upped to Strong Buy

The Zacks Investment Research upgraded CVB Financial Corp. (CVBF-Free Report) to a Zacks Rank #1 (Strong Buy) on May 27.

Why the Upgrade?

On May 15, the Ontario, CA-based bank completed the acquisition of American Security Bank with assets worth $431 million. The latest move will expand the company’s foothold in Southern California and thereby enhance chances for further top-line growth in the quarters to follow.

Moreover, CVB Financial’s first-quarter 2014 results were impressive as well. Earnings of 27 cents per share surpassed the Zacks Consensus Estimate of 23 cents. Further, the company has delivered positive surprises in the trailing four quarters while maintaining an average beat of 11.4%.

The robust first-quarter results were primarily driven by top-line growth attributable to improvement in both net interest income as well as non-interest income, partially offset by higher expenses. Further, a decline in allowance for loan losses and a recovery of nearly $1 million were other tailwinds of the quarter.

Further, despite a low loan demand in the reported quarter, CVB Financial’s total loans and leases, net of deferred fees and discount, was $3.40 billion, up 1.0% on a year-over-year basis. Moreover, the company has a healthy loan pipeline which will support revenue growth in the upcoming quarters.

For 2014, the Zacks Consensus Estimate inched up 1.1% to 95 cents per share over the last 30 days. However, for 2015, the Zacks Consensus Estimate declined 1.0% to $1.02 per share over the same time period.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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