According to Deutsche Bank, which has just upgraded RBS, the bank’s interest rate sensitivity is now among the most geared in Europe.
With rates in the UK rising sooner than in Europe, Deutsche (DB) believes RBS’s share price and valuation – 8.8 times projected 2019 earnings per share – represents an attractive entry point.
The stock has underperformed sector peer Barclays and Lloyds and the wider European market year-to-date, partly because of a change in guidance in the 2017 results; RBS no longer gives an explicit cost target for 2020 or a reduction target for 2018, DB noted.
According to DB, what the underperformance doesn’t appear to reflect is the change in UK rate expectations since the beginning of the year.
The German bank has upgraded RBS to ‘buy’ from ‘hold’ and shave 10p off the price target at 305p.
According to Factset, the data aggregation specialist, the majority of analysts – 12 out of 20 – hold a neutral position on RBS; seven rate it a ‘buy’ and one as a ‘strong sell’.