RBC Capital upgrades RBS to 'outperform'

RBC Capital Markets upgraded Royal Bank of Scotland to ‘outperform’ from ‘sector perform’ and lifted the price target to 375p from 350p.

“2016 should be a year of meaningful progress for RBS with the passing of the bulk of litigation and restructuring charges and ending with a successful stress test that leads to regulatory approval for capital return,” said the bank.

It argued that the share price overly discounts the amount of excess capital and with 28% potential all-in return, it upgraded the shares.

RBC said the London-listed bank has made good progress in the first two of the six-year restructuring programme under chief executive Ross McEwan.

“We believe execution of the plan and return of excess capital is not sufficiently discounted in the current share price and we think risk is skewed to the upside given recent underperformance.”

It added that RBS is the best-capitalised UK bank. "Following the Citizens Financial Group disposal, RBS will report the highest CET1 ratio at 31 December 2015 on our estimates, at 17.0%."

At 0855 GMT, RBS shares were up 1.7% to 298.80p.