Shares in Royal Bank of Scotland Group (LON:RBS) have been in demand in today’s session as Morgan Stanley turned bullish on the bailed-out lender. The analysts argue that the part government-owned bank offers earnings visibility compared to peers.
As of 13:07 GMT, RBS’ share price had added 3.96 percent to 291.60p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.09 percent higher at 7,737.68 points. The group’s shares have added more than 28 percent to their value over the past year, as compared with a more than six-percent rise in the Footsie.
Morgan Stanley upbeat on RBS
Morgan Stanley lifted its rating on RBS from ‘equal weight’ to ‘overweight’ today, and hiked its price target on the shares from 265p to 330p. Proactive Investors quoted the analysts as explaining in a note to clients that they believed that the bailed-out lender offered “better earnings visibility vs. peers as market share wins in mortgages will make it less vulnerable to ongoing asset spread compression in the segment”.
The broker further reckons that “substantial deleveraging in its corporate book and less exposure to consumer should see more resilient asset quality performance if macro were to deteriorate”.
Analysts flag share buybacks
Morgan Stanley additionally estimates that, with a lower increase in capital requirements than its peers, RBS could afford share buybacks equivalent to between 15 percent and 20 percent of its market cap over time on top of dividend payments.
The rating update comes after RBS recently inked a deal to offload the offshore operations of its Lombard leasing unit as it continues to retreat from non-core businesses, and in preparation for new rules requiring UK lenders to separate their retail banking from riskier operations.