Broker snap: RBS hit by UBS downgrade

17th Sep 2013 15:51

Shares in part-nationalised lender RBS were trading lower on Tuesday after UBS downgraded its rating on the stock from 'buy' to 'neutral'. The bank said it likes the bank's improving fundamentals - "under a new 'business-focused' management team" - but reckons that its valuation is up with events."With political uncertainty still remaining, there are likely to be better entry points for the stock," the Swiss bank said.Analyst John-Paul Crutchley said that return on equity (RoE) is likely to remain "depressed" in 2013 and 2014 as the group completes its restructuring and deals with the remainder of non-core assets.New management - Chief Executive Officer Ross McEwan and Chief Financial Officer Nathan Bostock - take up their roles in October, but Crutchley said that the company's strategy still remains subject to politics, given the debate on whether or not to split RBS into a 'good' and 'bad' bank.The analyst said: "Our view is clear - such a plan would have made good sense in 2008 but has little relevance to the RBS of today where the fundamental problems lie in the core operations (Markets, Ulster and US) rather than the residual legacy assets."The stock was down 0.90% at 363.20p by 15:58 on Tuesday.The news that the government has begun the sale of its stake in state-backed banking peer Lloyds was also weighing on RBS today.The UK Financial Investments - the company that manages the government's investments in Lloyds and RBS following their government bailouts in 2008 - placed a 6% stake in Lloyds this morning, selling shares to institutional investors at a 3.1% discount to yesterday's closing price.BC