RBS share price: what’s the outlook as Saudi merger strengthens core capital?

Royal Bank of Scotland saw its share price rally on at the start of the week after the lender revealed that merger between two Saudi-based banks will strengthen its core capital.

Royal Bank of Scotland (RBS) Source: Bloomberg

Royal Bank of Scotland (RBS) saw its share price rise more than 3% since Monday after the lender revealed how a merger between Alawwal Bank and Saudi British Bank would help strengthen its core capital ratio.

RBS records drop it quarterly profit

The boost to its core capital ratio from the Saudi bank merger is welcome news after RBS recorded a drop in its Q1 profit in April.

Since trading update, RBS has seen its share price fall by more than 18% from 263p a share to 221p a share as of 14:35 GMT on Wednesday.

Analysts at HSBC reiterated their ‘buy’ rating for RBS last week, but did not provide a target price for the stock. However, the UK lender has an average valuation of 301.69p a share according to a reent consensus compiled by MarketBeat.

RBS core capital bolstered by Saudi merger

RBS was able to bolster its core capital ratio through its Dutch subsidiary NWM NV, which holds and aggregate 40% shareholding in Alawwal Bank, dating back to the lender’s acquisition of ABN AMRO back in 2007.

‘We are pleased that this merger has now concluded; it will help facilitate the future exit of our shareholding as we continue to focus on our key target markets,’ RBS CEO Ross McEwan said.

‘The release of capital will also have a positive and material financial impact for RBS,’ he added.


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