RBS share price steady after Credit Suisse upgrade ahead of full-year results

Royal Bank of Scotland will unveil its full-year results on Valentine’s Day, with analysts from Credit Suisse expressing their fondness for the stock ahead of the lender’s latest earnings update.

Royal Bank of Scotland (RBS) will deliver its full-year (FY) results on Valentine’s Day (14 February), with analysts from Credit Suisse initiating their coverage of the stock with fondness, offering the lender an ‘outperform’ rating.

Credit Suisse also issued a price target for RBS of 260p, which based on the stock trading at 222p as of 14:00 (GMT) on Tuesday, implies a potential upside of 17.1%.

The news will be welcomed by RBS, with the bank getting off to a poor start in 2020, with the stock down 9% year-to-date (YTD), underperforming the broader market.

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UBS remain neutral ahead of full-year results

Analysts from UBS were less upbeat about RBS’ share price, reiterating their ‘neutral’ rating for the stock in February and issuing a price target of 230p

Meanwhile, analysts from Barclays Capital downgraded RBS from ‘equalweight’ to ‘underweight’ in January, though opted to leave their target price for the stock unchanged at 225p.

Based on where RBS is currently trading, Barclays Capital believe that the stock is valued appropriately, though their rating suggests investors should consider reducing their holdings in the company.

Barclays said that its rationale for the downgrade is due to the bank continuing to see net interest margin pressure, with the restructuring efforts to support underperforming NatWest Markets and Ulster units likely to take time before bearing fruit.

‘RBS has been sustaining high returns in recent years; however, our analysis suggests net interest margin headwinds are under-appreciated (particularly if the Bank of England cuts the base rate on 30 January) and RWA inflation will also likely drag,’ Barclays Capital said in a note.

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RBS no longer plagued by PPI

RBS’ newly appointed chief executive officer (CEO) Alison Rose will be hoping to deliver a strong set of FY results on Friday - her first since taking the helm.

Thankfully for the new CEO she will no longer be plagued by payment protection insurance (PPI) charges, which have weighed on the bank’s profits, with the deadline for claims passing last summer.

Brexit uncertainty, though not completely over, has reduced significantly since the Conservative Party secured a landslide victory in the UK general election last December, giving RBS and its peers a degree of clarity over the country’s future relationship with Europe.

However, investors are eager for an update on RBS’ underperforming businesses like Ulster and NatWest Markets, as well as details on its new digital bank Bó.


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