RBS at risk from legacy issues and Scottish independence, says Berenberg

5th Sep 2014 09:55

Berenberg has hiked its target price for Royal Bank of Scotland (RBS) from 210p to 250p but has kept a 'sell' rating, saying that it remains "unconvinced on the core profitability of the franchise".In a research report on Friday, the broker said: "We believe the shares are expensive considering the legacy risks and the negative impact of the restructuring plan has yet to fully take effect."Berenberg acknowledged that RBS has settled some of its legacy trouble, but it still remains exposed to issues surrounding foreign exchange, the Federal Housing Finance Agency, US mortgages, LIBOR, PPI and interest rate mis-selling."While RBS has £4.9bn provisions against some of these issues, we believe it is exposed to further fines."Meanwhile, while the broker predicts a 'no' vote on Scottish independence on 18 September, it highlighted that a 'yes' vote could bring "serious short-term pain" for RBS.It estimates that the stock is 30% overvalued.Berenberg said that the target-price upgrade reflects its reduction in cost of equity forecasts as well as lower non-core run-off costs.The stock was down 0.5% at 353.17p by 10:24.