Can Royal Bank of Scotland See a Recovery Without Its CEO?

With shares of Royal Bank of Scotland (NYSE:RBS) trading around $9, is RBS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Royal Bank of Scotland is a global banking and financial services group that operates in the United Kingdom, the United States, and internationally through its two principal subsidiaries: The Royal Bank of Scotland and National Westminster Bank. In the United States, a subsidiary of the Royal Bank of Scotland, Citizens Financial Group, is a commercial banking organization. The company includes business segments of UK Retail, UK Corporate, Wealth, Global Transaction Services, Ulster Bank, US Retail & Commercial, Global Banking & Markets, RBS Insurance, Central items, Non-Core Division and Business Services. Financial services are gaining traction once again around the world. However, the bank has been seeing some heat lately as the current CEO, who has helped restructure the company, is stepping down. Also, the U.K. Government is asking the bank to split itself into “good” and “bad” portions.

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T = Technicals on the Stock Chart are Mixed

Royal Bank of Scotland stock has been struggling since the 2008 Financial Crisis. The stock has been recovering in recent times but has just broken lower which may not be very positive for it. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Royal Bank of Scotland is trading slightly below its tangled key averages which signal neutral price action, at best, in the near-term.


(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Royal Bank of Scotland options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Royal Bank of Scotland Options




What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options



August Options



As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.