RBS's underlying profit reached £3 billion during 2012, almost double that of 2011. However, RBS was forced to take an accounting charge relating to the value of its own debt, which pushed the company into a loss for the year.
Nonetheless, RBS has made progress in other areas, especially the restructuring of its balance sheet. Indeed, the company's Tier 1 capital ratio is now at 10.3%, while loans as a percentage of capital have come down to a sustainable level of 100% to indicate all of RBS's loans are now covered by customer deposits.
Furthermore, RBS continues to sell off non-core assets in order to pay down debt and strengthen its balance sheet. Indeed, RBS recently spun off insurer Direct Line and is planning to sell part of its stake in US retail bank Citizens Financial.
In addition, management believes that 2013 will the bank's last year of major restructuring.
Overall, RBS has been working hard during the past five years to put itself back together. So, taking into account the growth of RBS's underlying profit and prospects of a dividend, I believe now looks to be a good time to buy RBS at 302p.
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