The Royal Bank of Scotland Group (LON:RBS) is looking buoyant today after Citi upgraded it yesterday to ‘buy’ from ‘neutral’, lifting the target price to 300p from 285p.
The stock is currently outperforming the Footsie’s downward trend today, standing at 245.50p, up 0.59 per cent (11.46 BST), in contrast to the UK benchmark index which stands at 7578.27 at 11.46 BST.
Resuming of dividends
The upgrade from Citi came following the bank’s decision to resume dividends. According to Proactive Investors, Citigroup said: “RBS taking market share should benefit more than peers from rate hikes and has very attractive capital return prospects in the medium-term.”
First Dividend payment in 10 years
The dividend will be the first one paid since 2008 and was first announced in its interim reports earlier this month. The bank reported a profit of £888mln for the first half which ended June 30th 2018 (down from £939mln last year). The ever decreasing government stake in LON:RBS,(down from 70.1 % to 62.4% in June), and recent rise in interest rates, means attributable profits are set on an upwards path.
Shares still weak
Whilst the shares are still relatively weak, having not fully recovered from the 18% loss they suffered over the last 3 months, the stocks are steadily climbing, making a jump of 2.4% this morning alone. The low price makes these shares a prime target for any investor who is confident that the British banks are primed for a long-awaited turnaround.
Target price lowered
As well as boosting RBS to ‘buy’ from ‘neutral’, Citi has also lifted its target price to 300p (previously set at 285p), a move solely attributed to the bank’s stronger capital position. Though some investors are still cautious following the last financial crisis, many are taking note that the obstacles banks have had to face over the last decade are now almost completely out of sight, and with the deadline PPI repayment ,one of the major remaining obstacles fast approaching, more opportunities could await.