LONDON — Royal Bank of Scotland Group plc (ADR) (LSE:RBS) (NYSE:RBS) is due to announce its annual results on Feb. 28. At the time of writing, RBS’s shares are trading at 346 pence – up 23% from a year ago compared with a 6% rise in the FTSE 100.| Statutory EPS | -1.8 pence |
| Adjusted EPS | 0.2 pence |
| Core adjusted EPS | 0.7 pence |
| Pre-impairment core adjusted EPS | 1.2 pence |
| Core adjusted EPS assuming normalized tax rate | 4.1 pence |
Did I leave out the “Adjusted-to-produce-an-even-higher-EPS” number? OK, so that’s a joke. These various numbers are helpful to analysts who study the minutiae of RBS’s accounts, but how useful are they to humble private investors like us?
Tangible net asset value
I’d suggest you forget earnings when you look at RBS’s upcoming results and concentrate instead on the tangible net asset (TNAV) per share number.
In my view, TNAV is the single most useful valuation number for banks at all times, but perhaps especially when they’re recovering from a financial crisis and earnings are all over the place.
The table below shows RBS’s TNAV per share at the end of each quarter since last year.
| Dec. 31, 2011 | March 31, 2012 | June 30, 2012 | Sept. 30, 2012 | Dec. 31, 2012 |
|---|---|---|---|---|
| 501 pence | 488 pence | 489 pence | 476 pence | ? |
In terms of valuation, at a share price of 346 pence RBS is trading at a 27% discount to TNAV per share on the Q3 balance sheet date of Sept. 30. The TNAV is, of course, five months out of date now, so the updated number in the upcoming results will give us an improved handle on the level of the discount at which the shares are trading.
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