Numis downgrades RBS due to 'stretched' valuation

26th Mar 2014 11:01

Numis Securities has lowered its rating for Royal Bank of Scotland from 'add' to 'hold' and slashed its target price from 374p to 300p. Analyst Mike Trippitt said that while potential capital generation should provide some support to the shares, the stock's valuation "looks stretched".Nevertheless, he applauded the company's "new direction of travel"."The second phase of RBS's rehabilitation should be lower risk, being more dependent on restructuring and cost reduction, and less dependent on asset sales. RBS will emerge as a simpler, more efficient business, with a very strong capital position."However, Trippitt said that the results of the turnaround will be "long-dated".He estimated that RBS will be unlikely to generate returns above the cost of equity until 2018, after adjusting for excess capital.The stock was down 0.6% at 305.9p by 11:08 on Wednesday.BC