SocGen ups RBS to 'hold', says book value headwinds priced in

2nd Sep 2015 10:28

(ShareCast News) - Societe Generale upgraded Royal Bank of Scotland to 'hold' from 'sell' with an unchanged price target of 330p.It said the long-term view for RBS is attractive, namely to become a UK-focused retail and commercial bank. SocGen said the de-risking of the balance sheet has really taken hold over the past 18 months, with non-performing loans down by more than half from their peak and the core tier 1 ratio over 15% pro forma for the sale of Citizens.SocGen expects RBS's core tier 1 ratio to rise 350 basis points to 15.8% in the second half of the year. Of the improvement, 300bps relates to the regulatory deconsolidation of Citizens, which should happen when RBS has sold more than 80% of the company.The bank said there are significant headwinds to come. It estimates that there will be over £6bn of restructuring and litigation/conduct charges and government payments."These are a drag on tangible book value, which we see falling from the current 382p to 360p at the end of next year," said SocGen, although it added that this is now priced in.It continues to prefer Barclays, Lloyds Banking Group or HSBC.At 1033 BST, RBS shares were down 0.6% at 326.10p.