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RBS shares slump as HSBC, Macquarie downgrade stance

UBS maintained a ‘buy’ rating on RBS but lowered its target price to 265p from 285p citing “disappointing” second quarter results.

Royal Bank of Scotland -

Royal Bank of Scotland Group PLC (LON:RBS) was on the back foot on Thursday after analysts at HSBC and Macquarie downgraded their recommendation on the shares. 

HSBC cut its rating on RBS to 'hold' from 'buy' and lowered its target price to 210p from 260p after RBS reported weaker-than-expected second-quarter results. 

Macquarie downgraded RBS to ‘neutral’ from ‘buy’ and reduced its target price to 201p from 246p,  pointing to the disappointing results. 

Meanwhile, UBS and Goldman Sachs have slashed their target price on the shares. 

UBS maintained a ‘buy’ rating but lowered its target price to 265p from 285p. 

"RBS is most distinguishable from large cap local peers Barclays PLC (LON:BARC) and Lloyds Banking Group PLC (LON:LLOY) by its more liquid balance sheet, higher gearing to rates and UK corporates, the government's 63% stake and its significant excess capital,” the investment bank said.

"With yield curves implying rate cuts ahead, Brexit uncertainty high and 2Q19 results a 7% miss driven by net interest income we weren't surprised to see the share weak, post reporting.

"But here we think the stock is oversold and its capacity to return excess and future surplus capital generation is undervalued."

UBS reduced its earnings per share estimates for 2020 to 2022 by 12-16%, due to more bearish assumptions on interest margins and limited additional cost flexibility.

Goldman Sachs also reiterated a ‘buy’ rating but trimmed its target price to 325p from 360p.

Earlier this month, RBS warned that was unlikely to meet its longer-term profitability targets after second quarter revenues were hit by tough competition for mortgages. 

RBS shares fell 8.5% to 181.45p in morning trading.

Quick facts: Royal Bank of Scotland

Price: 222.7 GBX

Market: LSE
Market Cap: £26.93 billion

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