28th Jan 2014 08:22
LONDON (Alliance News) - Jefferies has cut its price target for Royal Bank of Scotland to 414p from 441p, to reflect further provisions announced on Monday. However this does not effect the overall Buy case for stock, says analyst Joseph Dickerson.
RBS announced a further GBP3.07 billion of litigation and conduct charges late on Monday. However, beyond this, the bank did not announce any underlying profit warnings and as a result now guides that it will have a fully loaded Basel 3 core capital ratio of 8.1%-8.5% as of the end of 2013.
Jefferies already flagged a worst case scenario of GBP4 billion of litigation risk back in November 2013, says Dickerson. Furthermore, "the provision for mortgage-backed securities looks less than some feared". The capital impact looks manageable and was already factored in when planning the bad bank, the analyst says.
Adjusting forecasts to reflect the latest provisions, Jefferies reduces its tangible book value of shares for 2013 to 382p from 403p. Fully loaded Basel 3 capital ratio estimate for FY13 drops to 8.4% from 9.0%. Jefferies now expects RBS to make a loss of GBP5.8 billion for full year 2013.
Forward earnings numbers are unchanged, however, and Jefferies reiterates its Buy rating on the stock, along with the reduced price target of 414p.
RBS shares are up 0.9% at 329.20 pence Tuesday morning.
By Jon Darby; [email protected]; @jondarby100
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