Royal Bank of Scotland’s financial targets out of reach, and Pets at Home is wagging its tail again

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“What an ugly start to August for global markets. Trump’s latest tariffs on China have put equities into freefall with stock prices marked down sharply,” says Russ Mould, Investment Director at AJ Bell.

“UK shares fell 1.6%, as measured by the FTSE 100 index, and most of Europe’s and Asia’s markets were down by more than 2%. As a guide, a downwards movement in excess of 1% is generally considered to be a bad day for the markets.

“An incredible 94 stocks out of the FTSE 100 were trading lower on Friday morning. The only ones to escape the pain were utility companies National Grid, Severn Trent and United Utilities, airline International Consolidated Airways, medical equipment group Smith & Nephew and metals miner Fresnillo."

Royal Bank of Scotland

“Despite all the excitement about Royal Bank of Scotland paying £1.7 billion in dividends to shareholders – including the Treasury which will get about £1 billion given it still holds a major stake in the company – the real story is that the bank is highly unlikely to meet its financial targets.

“If you exclude the sale of a stake in Saudi Arabia’s Alawwal Bank then its return on tangible equity in the first half of the year was only 7.5%. That’s some way short of the 12% target for 2020.

“Elements of the story are unchanged, namely that RBS is still suffering from margin pressure thanks to a price war in the mortgage market.

“With the increasing prospect of a Brexit no-deal on the horizon, Royal Bank of Scotland looks to be in a difficult situation. And for investors holding the shares as a source of income, they will need to consider the risk of a volatile share price and the potential for capital losses. The market is certainly spooked by today’s announcement given how the shares have fallen nearly 5%.”

Pets at Home

“Running a pet store should be a no-brainer. We are a nation who love animals and will spend large amounts of money on them, whether that’s food, accessories or vet bills.

“Unfortunately when the market opportunity is that clear you naturally get a lot of contenders vying for the same share of the consumer’s wallet.

Pets at Home has had to fight off competition from both offline and online players and has been through a very difficult few years. The latest trading would suggest it is bouncing back with gusto.

“Offering the right products at a fair price and delivering excellent customer service is the key to success in retail and there are early signs that Pets at Home has regained its focus and is doing the right thing.”

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