Deutsche updgrades RBS on 'unjustified underperformance'

Deutsche, which moved up to a 'buy' rating from its previous 'hold' but trimmed its target price to 305p from 315p, noted that RBS has underperformed Barclays, Lloyds and the wider European market so far in 2018.

Part of this under-performance is seen as relating to a change from RBS management's guidance at the recent full year results, where no explicit cost target was given for 2020 or a reduction target for 2018.

"But the underperformance doesn’t appear to reflect the change in UK rate expectations since the beginning of the year," analysts said, with the implied policy curve having risen >25bps for one-year to three-year, "and RBS’s interest rate sensitivity on most recent disclosures, now amongst the most geared in Europe".

With UK rates almost certain to rise sooner than those controlled by the European Central Bank, the share price and valuation of 8.8 times 2019 expected earnings per share "represents an attractive entry point"