Market Report: RBS on the rise as dividend seen coming in 2016

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Investors who stick by struggling Royal Bank of Scotland will be rewarded with a dividend at the end of this year.

That’s the view of RBC Capital, which tipped the bailed-out bank, whose stock market value shrank by a fifth last year, to go great guns this year. Analyst Claire Kane upgraded RBS to outperform with a richer target price of 375p, which helped the shares up 2.1p to 295.6p.

She expects the bank to pass stress tests, paving the way for a 10p-a-share payout for investors — the first since then-prime minister Gordon Brown’s £45.5 billion bailout more than seven years ago.

Kane reckons the lender, led by chief executive Ross McEwan, who is two years into a six-year turnaround plan, will be in a position to buy back two-thirds of the state’s stake in early 2017.

The analyst said: “[This year] should be one 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.” 

There was a modest revival after yesterday’s battering for the FTSE 100 index, which recovered 11.15 points to 6104.58.

Tesco was among the blue-chip winners, climbing 2p to 144.25p after Deutsche Bank decided the supermarket group’s shares were now worth buying after their dismal run.

The upgrade came even as it downgraded its third and fourth-quarter same-store sales forecasts, predicting they will fall 2.5% and 3.4% respectively compared with the year before.

Cantor Fitzgerald’s upgrade to a Buy gave shareholders in Royal Mail a 10.3p gain to 447.3p.

The broker urged investors to appreciate the network and brands of the firm which celebrates its 500th anniversary this year.

East European airline Wizz Air rose 16p to 1768p after record passenger numbers in December, and investors in plastics group Fenner, up 0.25p at 139.5p, were unfazed by the departure of chief executive Nick Hobson, who has left temporarily through ill health.

Carr’s Group, 1.5p cheaper at 148p, said its agriculture division was directly affected by Storm Desmond. One of its three feed mills was flooded, but was operational after a week.


Historic: Royal Mail is celebrating its 500th anniversary

The company, which said the low oil price has boosted sales at its fuel business, insisted insurance means floods will have little financial impact.

On AIM, Imaginatik, the software tiddler in which disgraced Quindell founder Rob Terry has a 15% stake, confirmed it had paid back the remaining $60,000 of a $110,000 (£75,000) loan which founder and chairman Matt Cooper provided in September.

However, a $250,000 loan, also at 10% interest a year, from Cooper remains outstanding and its terms have been extended. Shares rose 0.25p to 4.5p.

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January 6, 2016 |
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