Barclays downgrades RBS to 'underweight'
Barclays said net interest margin pressure and risk-weighted assets inflation are set to weigh on UK retail and commercial returns, while the restructuring of the underperforming NatWest Markets and Ulster businesses will require patience. In addition, the surplus capital return will be back-end-loaded, it said.
"RBS has been sustaining high returns in recent years; however, our analysis suggests net interest margin headwinds are under-appreciated (particularly if the Bank of England cuts the base rate on January 30th) and RWA inflation will also likely drag."
Barclays, which kept its 225p price target on the stock, said that at 9.5x 2021 earnings per share estimates, it is no longer cheap versus peers.
The bank cut its EPS estimates for 2020/21 by around 2% and moved its valuation forward to 2022. "There has been some unwind of the discount rate as we move from October 2020 valuation to January 2021," it said.
It noted that its new EPS estimates are about 10% below the latest Bloomberg consensus.
At 1140 GMT, RBS shares were down 2.4% at 225.10p.