Broker snap: Nomura concerned with RBS split ahead of Q3 results

21st Oct 2013 10:11

Nomura has maintained its 'reduce' rating for part-nationalised lender Royal Bank of Scotland, saying that talks over a split-up and large settlements highlight the risks the company faces ahead of its third-quarter results on November 1st."Judging from a Telegraph article over the weekend, we think it is becoming more likely that the 'Good Bank-Bad Bank' review will result in significant change for RBS," the broker said on Monday. This comes after the paper cited Chancellor George Osborne as saying that the decision to split the bank into two could be made in the next few weeks.Nomura believes minority shareholders have "much to lose" from an unfavourable outcome of the review, with the government maintaining considerable leverage.Meanwhile, the broker said that uncertainties regarding settlements with the Federal Housing Finance Agency for US mortgage-backed securities pose a "material risk to value"."After underperforming over 20% year-to-date (YTD), RBS has recovered most of that over the summer and is currently down 5% YTD," Nomura said."Against this expectation of material losses from the bad bank review having been reduced, though, expectations running into results remain low. Group faces considerable challenges to get back to profitability, which we feel will take a long time."The stock was down 4.82% at 354.74p in morning trade on Monday.BC