Sunday share tips: RBS, Next

6th May 2012 12:21

Last week's update from retailer Next was solid, with a fall in sales at its high street stores offset by sales at its home shopping business. Store sales fell 3.9pc in the 13 weeks to April 28, hurt by the recent bad weather. This was slightly worse than consensus expectations. Next Directory sales were slightly better than the City had pencilled in, rising 11.4pc. So, overall, sales rose 1.4pc. It is also noteworthy that Next was up against tough comparative numbers, with last year's first-quarter sales jumping 5.2pc following a warm Easter and the build-up to the Royal Wedding. The company will need to continue to deliver to maintain this rating - whatever shocks happen to the wider economy. The retail sector has already derated over the past month. There is no doubt that Next is a well-run, quality business. But Questor feels the shares are up with events and profit should be taken as they present themselves. Questor says sell.RBS was one of the most exposed banks in the world to the financial crisis, as the once great institution became a victim of its own hubris. Last week's first-quarter results were actually not too dreadful. The bank made a pre-tax loss of £1.4bn after being hit by a £2.46bn accounting loss linked to its own debt. So, when this is stripped out, profits were about £1bn. RBS also confirmed that it would pay back the last of a £75bn chunk of UK government-backed funding it received during the credit crunch. This is an important milestone. UK retail banking was one of the bank's stronger performers, with operating profits of £477m. Stephen Hester, RBS's chief executive, on Friday ruled out an imminent sale of the Government's 82% stake in the bank. This could have been a potential catalyst for the shares. But they are nowhere near the 50p level that the Government needs to break even. Questor reckons there might be a long wait for the shares to double. The resumption of dividends will not happen for at least a year and there is still much to do with the "bad bank". At current levels, Questor thinks the shares should be avoided as there are safer homes for your cash.AB