Broker snap: RBS doesn't need to raise capital, says Evolution

14th Oct 2011 12:52

Evolution Securities has reiterated its buy rating and 40p target for part-nationalised lender Royal Bank of Scotland (RBS), saying "don't let the facts get in the way of a good story".The broker emphasises that RBS does not need to raise fresh capital due to the following reasons: a core tier one ratio of 11.1%; 50% write-down of Greek debt in the second quarter; modest sovereign exposures to other PIIGS countries (Portugal, Ireland, Italy, Greece and Spain); elevated but falling impairments; and even a return to profitability in 2012."The flawed calculations used by the European Banking Authority in the discredited July 2011 stress test were largely attributable to ignorance. However, when experienced commentators who should know better then use the EBA mistakes as a starting point for calculations to mischievously suggest that RBS needs to raise fresh capital it is more than disappointing," said analyst Ian Gordon.The broker keeps its positive stance on the stock, highlighting it as a good time for an entry point for investors. However, Gordon adds that "if the FSA was doing its job then a few retractions might be in order to prevent the creation of such a false market in the first place."By 12:52 on Friday, shares were trading 1.57% higher at 24.54p.BC