The Banks’ Real Results: Barclays PLC (ADR) (BCS), Royal Bank of Scotland Group plc (ADR) (RBS)

Page 1 of 2

LONDON – Are you perplexed by the banks’ results? Suspicious of big improvements in “adjusted,” “underlying,” and “managed” performance when tucked away in the small print are large statutory losses? Join the club.

So last quarter, I decided to rigorously categorize the banks’ adjustments between underlying and statutory profit. I identified one-off exceptional items, costs of litigation over PPI and LIBOR, etc., and fair value adjustments that arise from accounting technicalities.

Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)If you’re interested, you can read more about the methodology here, and see the detailed analysis in this table:

Lloyds RBS Barclays (NYSE:BCS)
2012 2011 2012 2011 2012 2011
Underlying Profit 2,607 638 3,462 1,824 7,048 5,590
Exceptional Items 840 (435) (1,787) (4,078) 227 (1,419)
Litigation (4,225) (3,375) (2,191) (850) (2,450) (1,000)
Fair Value Adjustments 208 (370) (4,649) 1,914 (4,579) 2,708
Statutory Profit (570) (3,542) (5,165) (1,190) 246 5,879

The bottom line
But you can skip to this table that summarizes the results:

Lloyds RBS Barclays
2012 2011 2012 2011 2012 2011
Underlying Profit 2,607 638 3,462 1,824 7,048 5,590
Statutory Profit Before Fair Value Adjustments (778) (3,172) (516) (3,104) 4,825 3,171

The underlying profit shows the results as the banks would like you to see them, and may be a better indicator of future performance. The bottom line is what actually happened, adjusted to eliminate misleading accounting technicalities.

Both measures show significant improvement over last year. On the warts-and-all measure, Lloyds and Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) have made big reductions in losses, while Barclays PLC (ADR) (NYSE:BCS) enjoyed a muscular 52% rise in profits.

Lloyds Banking Group PLC (ADR) (NYSE:LYG)
Lloyds’ management sounded bullish. The bank is ahead of its transformation plan, reducing costs by 5%, two years ahead of target, and selling over 40 billion pounds of distressed assets in 2012 against a plan of 25 billion pounds.

With a concentration on U.K. retail and commercial banking, Lloyds has the lowest risk business model of the three banks, but one wholly dependent on the U.K. economy. That’s not a great short-term bet, but the long-term trajectory is upwards.

With the heavy lifting on its transformation nearly complete and PPI provisioning at an end, Lloyds shares are trading at 95% of tangible net asset value (TNAV). The prospect of a resumed dividend will give them their next big push.

Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)
RBS’s results announcement was also confident, predicting 2013 to be the last big year of restructuring. In 2012, it pulled off the flotation of Direct Line and shed over 10% of risk assets. As with Lloyds, the EU-mandated sale of branches stalled.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!