Broker snap: Earnings downgrades in order at RBS, says Nomura

3rd May 2013 10:01

Shares in Royal Bank of Scotland (RBS) were under heavy selling pressure on Friday as the bank's first-quarter results are likely to prompt earnings downgrades to consensus estimates, according to Nomura which kept its 'reduce' rating and 300p target price for the stock.'Clean' profit before tax (PBT), which excludes one-off costs, came in at £829m in the three months to the end of March, up from £553m recorded in the fourth quarter but well below the consensus estimate of £1,200m. Nomura itself was expecting a figure closer to £1,379m.Meanwhile, revenues edged higher from £5,760m to £5,850m quarter-on-quarter, materially missing forecasts for £6,200m, due to weakness from the Markets division.The broker pointed out that RBS is guiding to operating costs this year below consensus estimates of £13.2bn but given that markets were weak in the first quarter and restructuring is due, "it may not necessarily lead to a PBT upgrade".Nomura said: "On first look, we sense downgrades in consensus estimates as the group is annualising pre-provision profits of £7.5bn against full-year consensus of £8.2bn, with impairments only modestly better than consensus. We retain our cautious view on the stock."The shares were down 6.39% at 287.67p by 10:48.BC