RBS stock plummets after failing stress tests

30 November, 2016

Shares in the Royal Bank of Scotland (RBS) have fallen sharply this morning after the latest bank stress tests showed the lender failing on all measures. Despite this the FTSE 100 is moving slightly higher, in part due to an increase in risk appetite on the markets with the oil price rallying strongly on hopes of a positive OPEC meeting. The pound is mixed on the day with noticeable early gains against the Japanese yen and Australian dollar, but similarly sized declines against the New Zealand dollar and its Canadian equivalent. Sterling is little changed against the US dollar.

Stress tests reveal vulnerability in RBS

The results of the annual stress tests from the Bank of England have been released this morning and they make for pretty grim reading for shareholders in RBS, with the stock subsequently dropping by almost 5%. The bank, which is 73% owned by taxpayers, has emerged as the biggest failure in the latest health check on the sector which has been conducted every year since the 2008 banking crisis. Barclays and Standard Chartered both missed out on one measure of the tests but whilst their stock has moved lower by around 1% in early trade they are in a far better position than RBS. Despite CEO Ewen Stevenson acting swiftly in releasing a comment to try and appease disgruntled investors, there is only so much that positive rhetoric can do and worries remain surrounding the bank’s ability to survive a financial shock without needing further support from the public purse.

Oil soars on OPEC hopes

The price of oil has risen strongly this morning with hopes that a positive outcome will be realised at today’s OPEC meeting rising once more. Since the organisation announced in late September that they would cut their production to 32.5 million barrels per day there’s been a strong rally in Brent to its 2016 highs before some notable weakness as many began to question whether the cuts would be implemented. The issue is that all 12 members are in agreement that measures to curb production and support price would be beneficial, however most would prefer other members to cut rather than themselves. Recent sessions have seen strong declines in Brent, but today’s rally appears to show that traders are once more betting on a successful meeting. The official press conference is scheduled for 4pm this afternoon and a failure to deliver on the finer details regarding which countries will cut, and by how much, could see more weakness ahead.   

Britvic shares pop on earnings beat

The latest earnings results from Britvic show a solid performance for the soft drinks maker with revenue rising by 0.4% over the last 53 weeks on a like-for-like basis. As well as a rise in sales, the firm's margin has also increased compared to the previous period - however, when exchange rate considerations are made this ultimately means a slight decrease has occurred.

The highlight of the report is arguably a rise in adjusted EPS to 49.3p from 46.3p in what is clearly a positive development and represents a stronger reading than many had forecast. This figure alongside the increase in the dividend to 24.5p will likely please investors who have endured a challenging six months that has seen almost a fifth of their holdings value erased. Shareholders will be hopeful that these results can halt the decline seen of late and bring some fizz back to a stock that has lost its pop in recent times.

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