Proactive Investors - Run By Investors For Investors

RBS still 'mired' in legacy issues

RBS still 'mired' in legacy issues
A look at some broker analysis on the day

Royal Bank of Scotland (LON:RBS) was top loser on Footsie on Friday, though an improved performance in core divisions, did cause some cheer.

Appropriately for the time of year, George Salmon, analyst at Hargreaves Lansdown, said the bad bank remained a "horror story".

The state controlled lender earlier said it wouldn't hit cost and return targets to the time-table set out two years ago and blamed the “low interest rate, low growth environment”.

“Whilst we remain committed to achieving our long term cost-to-income ratio and returns targets, set out in 2014, we now do not expect to achieve these by 2019 as previously indicated,” RBS  said.

In the first nine months of 2016, RBS made a £2.5bn loss after incurring a £469m loss in the third quarter.

For the September quarter, it posted adjusted operating profits of £1.33bn, up from £716mln previously.

"Shaking hands on more commercial loans and mortgages is certainly good news, but the much maligned bad bank keeps attracting problems," said Salmon.

The £190m write down from the shipping portfolio is the latest in a line of impairments in recent years. Restructuring charges and losses are set to come in above the bank’s previous expectations for the full year, with the protracted disposal of Williams & Glyn again weighing on the group," he added.

“Royal Bank of Scotland continues to be mired by ‘legacy issues’ which pushed it into the red in the three months to the end of September," said Russ Mould at AG Bell.

ITV is 'outperform' says Credit Suisse

Elsewhere in analyst land, Credit Suisse repeats an 'outperform' rating on broadcaster ITV (LON:ITV) but culls the target price following a lowering of expectations on advertising spend this year.

Media buyers have significantly lowered forecasts for 2016 to negative 3%, from negative 1.3% previously, notes analyst Sophie Bell.

Earlier this week, ITV announced plans to cut jobs due to economic uncertainty particularly after the Brexit vote and total advertising revenues across the industry are set to decline by up to 2%.

For ITV, Credit Suisse has lowered its net advertising revenue (NAR) growth forecast for 2016 to negative 3.3% from negative 1.4% and 2017 NAR to minus 6% from minus 3%.

Berenberg lifts target on Just Eat

Just East plc (LON:JE.), the takeaway app, has had its price target forked up to 600p from 530p previously by German bank Berenberg,  which repeats a 'buy'.

Meanwhile, heavyweight Goldman has repeated a 'buy' on the grocery delivery firm and targets 450p a share - a huge distance from the current price of 280.8p.

Liberum says 'hold' IAG

City broker Liberum rates shares a 'hold'  for British Airways owner IAG (LON:IAG), which released third quarter numbers today.

Liberum said the September quarter were "in line" with the broker's forecasts and consensus.

The weakness in sterling cost the group €162m (£145mln) in the quarter of the year and operating profits fell 4%.

Willie Walsh, chief executive, said it had been a  tough operating environment but noted that the group's unit revenue performance was better than in the second quarter and  quarterly profit after tax was €970 million before exceptional items - an improvement of 9.9% compared to last year.

On the broker's estimates, IAG trades on a price -to-earnings ratio of 5.4 times' on 2016 estimates, rising to 6.2 for 2017.

"These multiples are a material discount to the group’s historic trading range and its European network carrier peers," it says.

"We struggle to see how a discount valuation is justified."


Register here to be notified of future RBS Company articles

No investment advice: The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use