Broker snap: RBS faces material uncertainties, says Nomura

26th Feb 2013 10:55

Nomura has reiterated its 'reduce' rating and 300p target price for UK lender Royal Bank of Scotland (RBS) ahead of the bank's full-year results later this week.The broker expects to see core profits of £6.1bn for 2012 when the company reports on February 28th, falling to £5.2bn if excluding mandated sales. Core earnings per share are forecast to come in at around 38p, which means that RBS is trading at nine times 2012 earnings, improving to 8.5 times on 2013 estimates.Non-core is expected to make a loss of £2.6bn for 2012.Meanwhile, one-offs are forecast to total £7.7bn, £2.0bn of which came from the fourth quarter. Nomura said that this includes £400m for PPI redress, £390m for LIBOR-rigging fines and £800m for interest-rate hedging products. As for RBS's strategic plans, Nomura highlighted recent stories that suggest the bank is thinking more proactively about how to pay back the government, which bailed it out in 2008.The broker said: "Some combination of share sale and/or asset sale to buyback the government's stake is in order and looks feasible before the election, if asset quality trends remain stable. However, the sale of shares in the company, which we see as likely in the medium term, will increase overhang on the stock."The rumoured sale of its US retail arm Citizens could partially offset this, the broker suggested, "but a rushed sale is not the best option, and it remains to be seen if the group can resist external pressure to do so."Nomura concluded by saying: "We believe the group still faces material uncertainties with respect to deleveraging, asset quality and the future shape of operations, and remain cautiously positioned on the name."Shares were down 3.04% at 344p by 10:54 on Tuesday.BC