RBS share price: Lender working on Ulster solution

on Mar 3, 2014
Updated: Apr 9, 2020

iNVEZZ.com Monday, March 3: Royal Bank of Scotland (LON:RBS) is working on a radical plan to save its ailing Irish business by merging it with a number of rivals. RBS’s attempts to curb losses at Ulster Bank or find a buyer have so far been unsuccessful and a team is now looking at tie-ups with other lenders such as mortgage lender Permanent TSB or the Irish subsidiaries of Danske Bank or KBC. Shares in the 81 percent government-owned bank opened 7.01p or 2.14 percent lower at 320.89p.

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Ulster Bank is weighing heavily on RBS with ₤2.5 billion of losses in the past two years. The business accounts for less than four percent of RBS’s balance sheet yet last year it was responsible for 20 percent of the bad debt charges. An RBS insider quoted by the Financial Times said: “The new chief executive Ross McEwan has plucked a couple of his best bankers with private equity and restructuring experience to work with the Ulster Bank team.”

Michael Noonan, Ireland’s finance minister, has commented that he would like a “significant” new bank with a large balance sheet to enter the nation’s market this year and stir competition. The minister said yesterday he was mulling over the possibility of overseas banks partnering with Irish lenders to compete with Ireland’s biggest lenders – Bank of Ireland and Allied Irish Bank.

**RBS Securities to halve its assets in response to tougher Fed regulations**
RBS is planning a sharp scale back of its US business in response to new regulations from the Federal Reserve. The bank wants to reduce the assets in its broker-dealer operation in New York by half, below the $50 billion (₤29.8 billion) threshold at which the toughest new rules come into effect.

The Fed’s foreign banking organisation regime, expected to come into force in the second half of the decade, will require banks with more than $50 billion of assets to create a holding company and comply with tough capital and leverage requirements.
RBS Securities, the New York broker-dealer unit, had assets of more than $100 billion (₤59.7 billion) as of June last year. If it manages to reduce its assets below $50 billion, the unit would ensure that capital won’t become trapped in the US. The less onerous requirements for banks with assets of more than $10 billion will still affect RBS Securities.

**Analysts on RBS**
JP Morgan Chase & Co reaffirmed its ‘underweight’ rating on RBS’s shares in an investor note sent on Wednesday last week. It currently has a price target of 330.00p on the stock, indicating a potential upside of about 2.8 percent from today’s opening price.
A total of 17 analysts rate RBS as a ‘sell’, nine give it a ‘hold’ rating and seven are calling it a ‘buy’. The shares have a consensus rating of ‘hold’ and an average price target of 327.09p.
**As of 09.00 UTC buy RBS shares at 321.90p.**

**As of 09.00 UTC sell RBS shares at 321.70p.**


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