RBS share price: Berenberg expects dividend return next year

on Oct 31, 2017
Updated: Mar 11, 2020

Analysts at Berenberg Bank remain bullish on Royal Bank of Scotland Group (LON:RBS), arguing that the company could return to paying dividends next year. The comments come after the bailed-out lender updated investors on its Q3 performance last week, revealing that it was profitable for the third consecutive quarter, while signalling that investors should not expect a full-year profit until next year.

RBS’ share price has been little changed in London this morning, and as at 09:43 BST stood at 284.20p, flat in percentage terms. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.33 percent higher at 7,512.51 points. The group’s shares have added more than 50 percent to their value over the past year, and are up by some 26 percent in the year-to-date.

Berenberg remains bullish on RBS

Berenberg reiterated its ‘buy’ rating on RBS today, with a price target of 300p on the shares, arguing that market consensus was failing to appreciate the group’s cost-cutting delivery.

“Management is delivering on its promises; cutting costs aggressively while growing the core business,” the broker’s analyst Peter Richardson commented, as quoted by Citywire. “Despite this, consensus fails to reflect RBS’s cost targets. By contrast, we believe RBS can get close to its £6.4 billion target cost base one year early.”

Analysts flag return of dividend

Berenberg’s Richardson further believes that the lender can return to paying dividends next year, with 35p of excess capital per share set to be distributed.

“With RBS trading on 10.2 times our 2018 estimated earnings per share for the core bank, we believe this excess capital remains undervalued,” Richardson pointed out. His comments are a boost for the bailed-out lender after Invested sounded a downbeat note on the shares yesterday, arguing that the last quarter would wipe out the group’s earnings in the year-to-date. 

As of 10:04 GMT, Tuesday, 31 October, Royal Bank of Scotland Group share price is 284.00p.