Broker snap: RBS a 'sell' after third quarter results, says Investec

1st Nov 2013 09:44

Investec has recommended a 'sell' rating for Royal Bank of Scotland (RBS) after reporting a third quarter loss. The bank said that non-core operating losses widened to £845m from £586m a year earlier due to exit and restructuring costs as the bank prepares to return to privatisation. Consensus was for a third quarter attributable profit of £180m. At the same time the 81% state-owned lender announced that it would create an internal so-called 'bad bank' where it will shelve £38bn of its toxic assets."Another results day, another grim wake-up call," Investec said."The Q3 2013 numbers reveal a plunge back into the red: Attributable Loss -£826m (Q1: +£393m, Q2: +£142m) and Q4 will be much much worse (a £38bn 'internal bad bank' triggers impairment acceleration of £4-4.5bn in Q4), and we still expect IRHP top-ups, bank levy etc). RBS is on a punchy 0.9 times core profit before tax (£1.3bn) in-line; Non-Core losses spiked to £0.8bn. Sell."Nevertheless, the broker said it was enthusiastic for the recent appointment of new Chief Executive Ross McEwan and was encouraged by the company's return to net loan growth (+£0.5bn) in UK Retail and modest net interest margin recovery.Shares fell 3.78% to 353.70p at 09:58 on Friday.RD