Morgan Stanley turns positive on RBS for first time in six years

26th Aug 2015 14:09

(ShareCast News) - Morgan Stanley upgraded its stance on Royal Bank of Scotland to 'overweight' from 'equalweight' and lifted its price target to 400p from 345p as restructuring enters the final furlong.The bank said this marks the first time in six years that it's turning positive on RBS.MS said it has had an 'underweight' or 'equalweight' rating on RBS over the last five years, having consistently been concerned about the timeframe for delivery of the normalisation milestones and potentially lower earnings power of the smaller core bank.It noted the stock is now down around 18% year to date, trailing behind Lloyds Banking Group and Barclays."RBS has repeatedly disappointed market expectations on earnings power as the definition of 'core' has been whittled away. Now, as the final layers are peeled away a slimmed-down UK/Irish retail and commercial bank with top three position in its key markets should start to emerge by 2018," the broker added.MS said its new in-depth analysis looking beyond the transition phase suggests the "go-forward" bank can beat expectations by delivering over 14% return on average equity by 2018.At 1416 BST, RBS shares were up 2.2% at 328.10p.