Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • AUD/USD

    0.6531
    +0.0013 (+0.20%)
     
  • OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD

    2,254.80
    +16.40 (+0.73%)
     
  • Bitcoin AUD

    107,847.36
    -548.61 (-0.51%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6046
    +0.0012 (+0.20%)
     
  • AUD/NZD

    1.0903
    +0.0001 (+0.01%)
     
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NASDAQ

    18,254.69
    -26.15 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,807.37
    +47.29 (+0.12%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     

RBS dives after abandoning targets

RBS shares were lower on Monday after analysts downgraded the stock in the light of its decision to abandon its earnings targets.

Espirito Santo Bank, which owns the UK brokinh house Execution, downgraded RBS shares to neutral after it scrapped its return on equity target of 15%.

RBS, which took the decision after a poor third quarter in its investment banking division, said it is now aiming for returns to exceed its cost of equity, which Espirito assumed to be 12%, with the timeline extended beyond 2013.

Espirito’s financial analyst Shailesh Raikundlia said in a note: “The resulting 50% cost income ratio target has also been delayed, although RBS is on course to meet its deleveraging of non-core targets. Weak revenues, the ICB’s final recommendations and higher capital requirements necessitate a restructuring of GBM if returns are to exceed its cost of equity. While we do see value in core, escalating disposal losses in non-core and high impairments at Ulster Bank will persist. We also believe the UK Government’s 83% stake is likely to remain an overhang for sometime. “

ADVERTISEMENT

Raikunda added: “The dividend access right inherent in the Government’s B shares effectively restricts dividend payments. We therefore downgrade our recommendation to Neutral from Buy and reduce our fair value from 51p to 22p.”

UK banking stocks were sharply lower on Monday as investors took a risk-averse stance following poor data from Asia and a lukewarm response to the election of a centre right government in Spain.

AIR publishes a weekly magazine. Subscriptions are free at www.aireview.com.au