Analyst Jason Napier, in a note, said: “the recent sell-off has seen RBS fall too far, in our opinion, leaving it a lower risk and more attractive return prospect than the market appreciates.”
And Napier added that a ‘legacy free’ version of the bank, which is still about 73% owned by the UK Treasury, would trade in-line with Lloyds (LON:LLOY).
He says the market is applying a £19bn – 63% of the current market capitalisation – discount to the bank’s value due to its legacy issues. According to Napier the uncertainties will begin to clear, and it would then be only a matter of time for the bank to see a re-rating of its shares.
UBS now has a ‘buy’ recommendation for RBS, and it has a 350p price target which suggests some 27% upside to the current price of 254p.
Separately, Napier also described Lloyds as having ‘undervalued pay-out power’ as UBS repeated a ‘buy’ recommendation for the bank, but, reduced its target price to 88p from 97p.
At the same time, HSBC downgrades sector rival Amec Foster Wheeler (LON:AMFW) to ‘hold’ from ‘buy’. And, separately, Weir Group (LON:WEIR) has today been marked down by both Jefferies and JP Morgan Cazenove; which now rate it as ‘underperform’ and ‘underweight’ respectively.