Market Report: Troubled RBS boosted as UBS analyst gives seal of approval

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The UK banking industry’s long-term problem child — Royal Bank of Scotland — might just be misunderstood by investors.

That’s the view of UBS, which suggested the bailed-out bank’s share price slump — it has plunged 17% this year — now makes it worth buying.

Analysis from UBS’s Jason Napier implies investors believe sorting out the legacy issues — namely fines for PPI mis-selling, market rigging and litigation — will cost RBS £19 billion, almost two-thirds of its total value.

He also expects more than half of its market capitalisation to be returned to investors through dividends by 2020.

RBS rose 3.6p to 254.9p and rival taxpayer-backed lender Lloyds, which gained 0.45p at 63.59p as UBS named it its “key call”, were among the few risers on another day for investors to forget.

The FTSE 100 lost 74.06 points, or 1.3%, to 5802.94 as a barrel of Brent crude oil dropped back below $30 and China’s stock market crashed 6%.

Investors ignored an upgrade to Buy on Vodafone from Jefferies as the mobile giant’s shares drifted 3.75p to 214.75p. The investment bank said Vodafone needs to strike a deal with US suitor Liberty Global, to “secure its long-term prospects”, but that it might be more likely now the values of both groups have shrunk.

Troubled oil services companies came under more pressure as HSBC said buyers of the distressed companies would not swoop until they became even cheaper.

Amec Foster Wheeler, downgraded to Hold, fell 12.9p to 368.3p, Weir Group, now rated underperform, retreated 42p to 801.5p, and Petrofac was 15p cheaper at 704p as its target price was slashed by HSBC.

In the retail world, softer pre-Christmas sales left carpet retailer Carpetright 48p worse off at 402p, and Card Factory down 7.4p to 341.3p e — even after a strong update. Conviviality sank 1.5p to 202.5p as the Bargain Booze owner welcomed David Robinson, formerly of Argos, as managing director of retail business.

Pinewood Group, the film and TV studios under pressure from Richard Bernstein’s activist fund Crystal Amber, improved 0.85p to 425.85p as it laid out plans to tap into the thriving TV drama production industry.

David Lenigas’s AfriAg, the African logistics company the Australian entrepreneur once dubbed “Lonrho Mark 2”, crashed 0.03p or 18% to 0.12p after it unveiled plans to cancel its AIM shares, leaving just an ISDX listing.

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January 27, 2016 |
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