Broker snap: RBS rated 'reduce' by Nomura after first-half miss

2nd Aug 2013 10:22

Nomura has maintained its negative stance on part-nationalised lender Royal Bank of Scotland (RBS), saying it expects mid-single-digit downgrades to profit forecasts on the back of disappointing first-half numbers. The broker kept its 'reduce' rating and 270p target price for RBS.The bank reported a clean profit before tax (PBT) before non-recurring items of £676m for the second quarter, down from £747m in the first three months and well below the consensus forecast of £880m.Core PBT in the second quarter totalled just £1.06bn, down from £1.25bn in the first and under the £1.35bn estimate.Nomura said: "Overall, the Core profitability is struggling. If the investment case is around buying the Core income stream like at Lloyds, then this set of numbers is uninspiring, and the group has a long road ahead to restructure sub-optimal areas in the Core operations."On a positive note, Nomura said that the bank's capital position is better with a Basel-3 core tier-one ratio of 8.7% and a leverage ratio (measured by the Prudential Regulation Authority) of just over 3.0%.The broker concluded: "We see a long road ahead for RBS, and are in no hurry to believe that RBS is lagging behind Lloyds by only a year, as the scale of improvement required here is large. "With a new CEO coming in, results will likely remain uninspiring as he may choose to purge the many headwinds that RBS faces, but within the context of managing the group capital ratios."The stock was down 3.96% at 320.3p by 10:43.BC