Quick takes on RBS share price history

The Royal Bank of Scotland Group (RBS) is one of the major retail and commercial banking groups in the United Kingdom. Formed in 2000 after the Royal Bank of Scotland and National Westminster Bank merger, RBS has grown into a banking giant with operations across Europe, the Middle East, and Asia.

In this article, readers will learn about RBS stock, the RBS share price history, why it undergoes rebranding, and the factors that could affect the RBS share price.

What is RBS in the stock market?

As one of the premier banking stocks traded on the London Stock Exchange (LSE), RBS has long been a major forerunner of the British economy. The bank’s shares are traded under the ticker RBS on the LSE.

Like most bank stocks, RBS share price strongly correlates with wider economic conditions in its home market. During strong economic growth and low unemployment, demand for loans and other banking services rises – boosting bank profits and share prices.

Conversely, recessions increase bad debts and loan defaults – putting pressure on bank earnings. This dynamic was painfully evident during the 2008 Global Financial Crisis, which hit UK banks, including the RBS share price, extremely hard.

RBS was one of the banks worst affected by the crisis, as its overexposure to high-risk mortgages in the US and UK spiralled out of control. As loan defaults mounted, the bank stared at collapse and had to be bailed out by the UK government with an emergency £45.5 billion cash injection based on the report of CNBC - which provides business news and real-time financial market coverage.

In return, the government took over a 70% ownership stake in RBS. The outcome was devastating for RBS shareholders, with the RBS share price losing over 90% of its value from early 2007 to early 2009. The taxpayer bailout and government intervention marked a long, turbulent period for the bank.

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Why is RBS changing its name?

In February 2022, RBS announced that it would change its name to NatWest Group Plc later in the year. The rebranding comes as the bank wants to move past its crisis-stricken image from the 2008 meltdown and the years under government ownership.

The NatWest name has a long history that predates RBS, with roots tracing back to 1968. It aims to build on the brand heritage of NatWest as it enters a new chapter. RBS hopes the rebrand will also help differentiate its retail banking business, NatWest, from its investment banking unit, NatWest Markets.

The newly-named NatWest Group will feature three core customer brands:

• NatWest: Serving retail and commercial banking customers in England and Wales
• Royal Bank of Scotland: Serving retail and commercial banking customers in Scotland
• Ulster Bank: Serving retail and commercial banking customers in Northern Ireland

Industry analysts expect the rebranding to gradually unify the bank’s operations under the NatWest banner in the coming years. But, the change will not impact shareholder structure or the bank’s current stock ticker.

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RBS share price history

In the lead-up to 2008, the RBS share price was trading strongly above £7 and reached over £12 in early 2007, reflecting investor confidence in RBS and its acquisitive global growth strategy. However, by 2009, its share price had plunged to below 50 pence, representing an astonishing loss of over 90% of its value.

This RBS share price freefall was brought about by exposure to high-risk credit instruments tied to the US housing market, which became worthless as the subprime mortgage crisis brought financial systems to their knees. To save RBS from complete collapse, the UK government was forced into a £45 billion taxpayer bailout.

Further plaguing investor sentiment has been RBS’s continued struggles with profitability, expensive litigation charges, regulatory fines exceeding £15 billion since 2008, disruption from challenger banks, and new fintech entrants.

While RBS CEO Alison Rose has set out a transformation strategy to simplify operations, resolve legacy conduct issues, and invest in digital banking, the path to rebuilding shareholder value remains unclear. Until RBS can deliver a consistent uplift in bottom-line results, investors may continue shunning the stock with memories still fresh of its dramatic crisis-era share price crash.

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Factors impacting RBS share price

Several key factors continue to impact the RBS share price performance. Consider the following information before trading.

Profitability challenges and economic conditions: Low interest rates have negatively impacted RBS’s traditional lending and savings business. This and substantial conduct and litigation charges have weighed on profit growth potential.

Brexit impact and uncertainty: The uncertainty related to the Brexit transition and outcomes has led to volatility and anxiety across UK bank stocks. This could impact credit demand and broader economic growth.

Government stake and privatization plans: The government still owns over 60% of RBS, limiting share price upside. Delays in privatization due to price languishing below purchase cost have also hurt investor sentiment.

Leadership changes and restructuring: RBS has seen major board and top leadership changes in recent years as part of restructuring efforts, creating uncertainty over future direction. Higher costs related to reorganization have also squeezed profits.

Competition and disruption in the banking industry: Challenger banks, fintech innovations, and new banking regulations have intensified competition and disrupted established players like RBS. This creates ongoing risks to market share and margins.

The path forward remains difficult for RBS as it works to reduce operating costs while facing economic sluggishness and ownership uncertainty in the coming years. Executing well on strategic initiatives around digital transformation and sustainable finance may help improve its long-term competitive positioning.

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As a final thought

More in-depth research is highly advisable for traders and investors considering RBS stock before risking capital. Reviewing NatWest’s post-rebrand financial reports, profitability restoration plans, economic analyses, and comparison to banking peers would give greater insight into whether this company can regain its footing.

While the valuation and restructuring efforts look promising, the bank still has much left to prove after the painful crash of its market value over 90% during the crisis. Trade carefully with due diligence before considering the company.

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”