Newspaper article The Evening Standard (London, England)

RBS Shares Get a Vote of Confidence from Citi

Newspaper article The Evening Standard (London, England)

RBS Shares Get a Vote of Confidence from Citi

Article excerpt


IF YOU want to test your patience, buy shares in Royal Bank of Scotland.

That is the advice of Citigroup, which today recommended clients snap up the stock, saying that the NatWest owner now has sufficient capital to deal with a prolonged recession.

Assuming we are not heading for a full-blown 1930s-style economic meltdown, the City big gun made the bold call of declaring the bank should not need another fundraising or to sell off any of its assets.

In a note titled In for the Long Haul, analyst Tom Rayner warns there will be "no fast track to redemption" for RBS and that the bad news will continue to pour out of the bank in the coming months, with significant writedowns in the fourth quarter of 2008.

But, over the long term, he believes the shares look tempting.

Rating RBS a buy, Citi sets a target price of 100p for the shares, which have risen 31% in the past week and today climbed another 3.3p to 54.1p.

The upbeat verdict came as RBS's [pounds sterling]15 billion rights issue came to a close with its shares still languishing well below the price of its 65'p cash call.

The results will be revealed on Friday but the only takers are expected to be the bank's directors. This leaves the

Government with a 58% stake in the bank and taxpayers nursing paper losses of around [pounds sterling]2.5 billion. It is a far cry from its cash call in June when 95% of investors signed up, paying 200p a pop.

The FTSE 100 added to yesterday's mega-gains, with the benchmark index recovering from early losses to move up 81.08 points at 4234.04 in volatile trading. Standard Chartered claimed first place among the top flight, surging 160p to 885'p, despite a string of gloomy broker notes, in what traders said had all the hallmarks of a classic bear squeeze. In New York, the Dow rose 124.72 points to 8568.11.

The gains in London came despite losses from most of the heavyweight miners after BHP Billiton walked away from its takeover bid for rival Rio Tinto.

Rio was the Footsie's biggest loser, shedding 750p to 1700p, amid talk the mining giant may have to refinance its debts with a rights issue. …

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