Newspaper article The Evening Standard (London, England)

Morgan Warns RBS Rally May Soon Run Its Course; Market Report

Newspaper article The Evening Standard (London, England)

Morgan Warns RBS Rally May Soon Run Its Course; Market Report

Article excerpt

Byline: MICHAEL CLARK

ROYAL Bank of Scotland was an early casualty today, falling 8p to 1560p after one City player took the view that investors have probably seen the best from the shares for the time being.

US securities house Morgan Stanley has slashed its 12-month target price for the bank, which includes NatWest, by 13% to 650p. It has also downgraded its recommendation from overweight to equal weight. It has taken into account the strong performance of the shares, up from a low of 1195p during the past year as the benefits of integration from the NatWest deal percolate through.

Meanwhile, Abbey National slipped 2p to 527p after broker Merrill Lynch urged clients to switch out of Lloyds TSB, 21/4p off at 4163/4p. Merrill is impressed by the [pounds sterling]30 billion shrinkage in Abbey's wholesale portfolio and has upgraded the shares from neutral to buy with a 635p price target. But it has downgraded Lloyds TSB from buy to neutral. Elsewhere in the financial sector, Royal & SunAlliance rallied from opening falls to trade 2p better at 146p ahead of interim results on Thursday.

The insurer said yesterday that it had embarked on a strategic review of the business, virtually confirming intense market speculation that a rights issue to raise up to [pounds sterling]900 million had been planned.

Early indications seem to suggest a twoforthree at 100p. RSA has raised about [pounds sterling]1 billion from disposals during the past year but still needs fresh funds to begin expanding the business again.

Broker Credit Suisse First Boston has begun coverage of rival insurer Prudential, 2p better at 460p, with an outperform rating and 500p target price. It says: "We are seeing signs of a lighter touch by the Financial Services Authority and the Treasury with regard to the UK life industry. …

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