Investec upgrades RBS to 'hold' from 'sell'

The brokerage said it does not recommend buying the shares given that it expects further material losses through 2016/17 with return on equity less than cost of equity until 2020.

Equally, it no longer reckons that the risk/reward supports maintaining a “naked” short position and advises taking profits.

Investec noted RBS shares fell 10% last weeks as developments around two of the bank’s key known headwinds came into focus.

It pointed to news that Deutsche Bank faces a $14bn settlement with the US Department of Justice and the fact the UK base rate is expected to be cut by 10 basis points, with no increase in rates seen until 2019 at the very earliest.

Investec said the latter was “overly negative” for a highly liquid RBS. “We continue to see RBS as the most exposed UK bank to ‘lower-for-even-longer’ UK interest rates too.

The brokerage maintained its 200p price target on the stock.

At 1040 BST, RBS shares were up 1.3% to 188p.