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Yesterday November 7,2008 Royal Bank of Scotland Group plc(RBS) completed a reverse split in the ratio of 20:1 of its ADR shares traded in New York.

This reverse split was first announced on Oct 30,2008 (Source: RBS Investor Relations Site):

Royal Bank of Scotland Group PLC- RBS Ratio Change for ADR Holders

“To maintain an appropriate price range for The Royal Bank of Scotland Group American depositary shares (”ADSs”) representing ordinary shares trading on the New York Stock Exchange, (NYSE Symbol: RBS), effective November 7, 2008, the ratio of one (1) ADS representing One (1) ordinary share will change to one (1) ADS representing 20 (twenty) ordinary shares.

Existing ADR holders will receive one (1) “New” ADS for every twenty (20) “Old” ADSs surrendered for cancellation.

This ratio change does not affect any of the RBS Preferred share ADS programmes.”

Before this reverse split the ratio between an ordinary share and an ADR share was 1:1.

ADR Share Price Calculation:
Yesterday closing price of 1 London-listed RBS ordinary share = 64.0 p
At an exchange rate of 1 British Pound = 1.56911 $, 1 RBS ordinary share = 1.00465$
So with the Reverse Split 1 ADR = 20 ordinary shares
That means 1 ADR must trade for: 20 * 1.00465 = $20.09

However RBS closed at $19.28 yesterday in New York.One reason may be that the market does not believe this reverse split will have a positive effect on the stock.

As part of the British Government’s 37 billion pounds rescue plan announced last month, RBS will boost its capital by 20 billion pounds by turning over control to the government. The government will get 5 billion pounds of preferred shares and common shares for the remaining 15 billion pounds. As a condition for accepting the government cash infusion, RBS has agreed not to pay a cash dividend as well until 2010. Despite the above cash infusion, many institutional and individual investors may not touch RBS due to many unknowns faced by the bank and the banking industry in general. Also on November 4, 2008 RBS warned “it will be hit by more writedowns and rising bad debts this quarter as its incoming chief executive kick-started a strategy overhaul aiming to restart dividends in 2010″ and added that “it expects losses on bad loans to continue to rise as a worsening economy and tough financial markets feed through to consumers and businesses”

Only time will tell if the reverse split will be successful or not in the long run.

Disclosure: Long RBS

written by David

London, UK

In April of this year, the marketing research firm Millward Brown, released the third annual Top 100 Brandz list. According to the report, companies that own the brands in this top 100 list “have significantly outperformed the stock market when compared to the S&P 500″. The rankings are based on analysis of financial data of the companies studies from Jan 2,2007 to Dec 31,2007 and interviews conducted with customers worldwide.

The top global brand name in this list is Google (GOOG) with a brand value of $86.0B. Coca-Cola (KO) is listed as fourth with a brand value of $58.0B. Other companies in the top 10 are General Electric (GE), Microsoft(MSFT), China Mobile, IBM (IBM), Apple(APPL), McDonald’s (MCD), Nokia (NOK) and Marlbaro. In this article we will review “The Top 10 British Brands” and the companies that own them.

The The Top 10 British Brands in the order of “Brand Value”are:

1. Vodafone (VOD)
2. Tesco (TSCDY)
3. HSBC (HBC)
4. Marks & Spencer
5. Barclays (BCS)
6. Standard Chartered Bank
7. BP (BP)
8. Royal Bank of Scotland (RBS)
9. Asda
10. Natwest

Some of the companies that own the above brands trade in the US. A brief overview of these stocks follows:

1. Vodafone (VOD) is a mobile telecom service provider with a customer base of 269 million in Asia, Europe, USA, the Middle East and Africa. VOD has a dividend yield of 8.57%. The PE ratio is 10.15 and the company has a market cap of $125.0B. The annual dividend growth rate is 31.6% for the past 5 years.

2. Tesco (TSCDY) is a retailer (grocery) with operations in the UK, Europe and Asia. Tesco’s ADR stock trades on the OTC market. Total revenue has been rising over the past 5 years due in part to the rise in global food prices. The current dividend yield is 4.44%.

3. HSBC (HBC) is a money center bank that serves 128 million customers worldwide. The dividend yield is 4.42% and the earnings growth in the past 5 years is about 25%. HBC is one of the few British banks to have limited impact from the current credit crisis.

4. Marks & Spencer - This famous retailer trades on the London Stock Exchange with ticker MKS.L.

5. Another global bank based in the UK is Barclays (BCS) . The stock pays a 5.72% dividend yield and is down about 40% in 52 weeks due to the global meltdown in financials. Barclays owns iShares, the world’s largest and best known ETF provider.

6. Standard Chartered Bank - StanChart does not have an ADR but is listed on the LSE with ticker STAN.L

7. BP (BP) is one of the world’s largest integrated oil and gas producers. The dividends for EPS have increased at an annual rate of 24.5% and 12% in the past 5 years. BP pays a great 6.07% dividend.

8. The holding company Royal Bank of Scotland Group Plc (RBS) owns the Royal Bank of Scotland and National Westminster Bank Plc which is number ten in the list above. Last year RBS together with Banco Santander (STD) and Fortis acquired ABN AMRO of the Netherlands.

9. Asda is UK’s second largest supermarket chain and owned by Wal-Mart(WMT). Asda competes against Tesco and other retailers.

10. Natwest, a short name for National Westminster Bank Plc is now part of the Royal Bank of Scotland Group plc (RBS).

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written by David

Tesco and Sainsbury are two large supermarket chains in the UK. With food prices rising worldwide and in UK, it may be worth looking into these stocks.Both these companies trade as ADRs in the OTC market.Some basic details about these ADRs are noted below:

1. Sainsbury Plc - JSAIY

Company profile: “J Sainsbury plc is a United Kingdom-based company principally engaged in grocery and related retailing, and financial services. The Company’s businesses are organized into two operating divisions: Retailing (supermarkets and convenience stores) and Financial Services (Sainsbury’s Bank). J Sainsbury plc consists of Sainsbury’s, a chain of 504 supermarkets and 319 convenience stores, and Sainsbury’s Bank. A typical Sainsbury’s store offers around 30,000 products, and many stores also offer non-food products and services. During the fiscal year ended March 22, 2008 (fiscal 2008), 147 stores provided an Internet-based home delivery shopping service”

Dividend Yield: 5.22%
P/E Ratio: 19.25
Market Cap: $12.0B

2.Tesco Plc - TSCDY

Company Profile: “Tesco PLC is an international retailer. The United Kingdom segment includes the start-up operations for establishing the operations in the United States. Its Rest of Europe segment includes the Republic of Ireland, Hungary, Poland, the Czech Republic, Slovakia and Turkey. The Asia reporting segment includes Thailand, South Korea, Malaysia, China and Japan. On April 15, 2008, the Company announced the launch of Tesco Digital, a one-stop shop for entertainment needs.”

Dividend Yield: 4.09%
P/E Ratio: 14.52
Market Cap: $58.2B

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written by David

There was an article in the “This is Money” site on May 8th about British bank stocks. The article basically suggested that maybe its time to cherry pick some of these battered
banks.Experts seem to believe that the worst of the credit crunch is finally over and that good times are ahead for British banks.

In the article,Guy de Blonay, a financial expert, and manager of the New Star Financials fund said “I would be surprised, given the information we have now, if financial stocks were not higher in 12 months time.”

As per the article, the market consensus on the following three banks are “Hold”.
1. Llyods Bank
2. Barclays
3. HSBC

Standard Chartered is a “Cautious Buy”.

The article puts HBOS and Royal Bank of Scotland,Allicane & Leicester in the weaker banks category and a “Weak Hold” rating on them.

ADR Impact:LYG, BCS, HBC, HBOOY and RBS trade as ADRs in the US.

Allicane & Leicester and Standard Chartered are not available as ADRs.

The following table lists some of the key financial ratios on these British Banks :

Lloyds bank does not have heavy US exposure and investments like HBC.So we would argue that it is a buy at these levels considering the excellent dividend yields.

Barclays has been hit pretty bad in recent months due to the failed attempt to acquire ABN Amro of Holland. Still BCS is a good buy for the long-term.It is a truly global bank with branches in many countries.

HBC may have some more losses and may find the going tough due to its acquisition of Household International a few years bank which lends heavily to high risk borrowers.If the economy worsens then HBC could face more problems.

HBOOY is a buy since it is mostly a UK-focussed mortgage lender.The share price is < $10 in the US. If you believe that the UK housing market is different than the US and
that the UK housing may not plunge as in the US, then HBOOY is a definite buy at these levels. The stock got split a year or two ago as the company rode the housing boom in the UK.

RBS was listed on the NYSE recently.This is a definite buy at these levels since the bank has an awesome yield and has been in business for over 100+ years operating
with a traditional Scottish management principles. Also recently the bank undertook a major re-capitalization program to shore up its bruised but not broken balance sheet.

Links:
Is it time to buy bank shares?

Technorati Tags: LYG, RBS, HBOS, HBC, British Banks, ADRs

written by David

The following is a list of British ADRs listed in the US:

** BBL,RTP,SSEZY,LGGNY,ITY,AZN,BCS,BSYare in this year’s Business Week’s list of “Euro BW 50“.

written by David