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Fellow UK bailout victim Royal Bank of Scotland (RBS) has failed to follow Lloyds Banking Group (LLOY) higher this morning. While the latter pleased investors yesterday with a special dividend and suggestions that the last of major PPI was behind it, and its shares are higher again today. A delay in the return of RBS dividends until after Q1’17, the likelihood of more ‘substantial’ litigation charges, issues in spinning out Williams & Glyn retail banking, Brexit risk as well as a slight miss on consensus estimates are all weighing on the shares after more chunky restructuring and litigation. And when you factor in aggregate losses of £50bn across the eight years since its 2008 £45bn bailout, this puts the bank’s turnaround struggles into perspective, even if in a stronger capital position on account thanks to post-crisis regulatory demands. Nonetheless, shares already off their worst levels, having briefly tested recent 3.5yr lows 220p. The question is whether the level holds in order to give us a 220-260p channel until some positives can be announced?
Mike van Dulken, Head of Research, 26 Feb
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