Broker snap: Uncertainty still hanging over RBS

3rd Nov 2009 13:05

The market has reacted badly to the revised terms of Royal Bank of Scotland's participation in the government's asset protection scheme, and the analysis from stockbroker Killik implies it has been right to do so.'In order to promote greater competition in UK banking and to meet EU State Aid rules, the level of divestments is greater than expected and underscores the fact that the European Commission is clamping down on those banks that have accepted a large level of state aid,' notes Jonathan Jackson, head of Equities at Killik.The bits Royal Bank of Scotland (RBS) will be obliged to sell include parts of the UK branch network, elements of its corporate business and its insurance business. 'However, the bank is being given four years to make the disposals, which are likely to be enhancing if the proceeds are used to buy back shares,' Jackson believes.'Overall, given the complexity of the scheme and the continued uncertainty hanging over the company, we find it difficult to recommend holding RBS,' Killik concludes.