Royal Bank of Scotland Group (LON:RBS) is set to benefit from a merger of two Saudi banks, Reuters has reported. The deal is set to free the part government-owned UK lender of £4.9 billion in assets it has been trying to shed for years and boost its core capital.
RBS’ share price has advanced in London this morning, having gained 1.13 percent to 294.80p as of 09:47 BST, outperforming the broader UK market, with the benchmark FTSE 100 index having slipped marginally into the red and currently standing 0.05 percent lower at 7,730.25 points. The group’s shares added just under 14 percent to their value over the past year, as compared with about a three-percent rise in the Footsie.
RBS to benefit from Saudi Arabia merger
Sources with knowledge of the matter told Reuters yesterday that the 18.6-billion-riyal (£3.7 billion) deal between Alawwal and larger rival Saudi British Bank (SABB) will reduce RBS’ stake in the merged group to around five percent, compared to a stake of about 15 percent in Alawwal. Two other sources close to the merger further indicated to the newswire that it could be easier for RBS to find a buyer for the smaller stake it will hold after the deal.
The news marks a boost for RBS which has been trying to trim its non-core assets and shore up its balance sheet as part of its post-bail-out transformation. Earlier this month, the group agreed a $4.9-billion preliminary mortgage settlement with the US Department of Justice, with the move set to pave the way for the UK government to start offloading its holding in the lender.
Analysts on bailed-out lender
Barclays, which sees RBS as a ‘buy,’ set a price target of 325p on the shares last week, while JPMorgan continues to see the company as ‘neutral,’ without specifying a valuation on the stock. According to MarketBeat, the bailed-out lender currently has a consensus ‘hold’ rating and an average price target of 288.17p.