RBS share price: what’s the latest ahead of its full-year results?

Royal Bank of Scotland (RBS) shares have had a poor start to the new year with the stock down more than 7% year-to-date, with the lender’s newly appointed chief executive officer (CEO) Alison Rose hoping to deliver a strong set of full-year (FY) results next week – her first since taking the helm.

Thankfully for the new CEO, she will no longer be plagued by payment protection insurance (PPI) charges, which have weighed on the bank’s profits, with the deadline for claims passing last summer.

Brexit uncertainty, though not completely over, has reduced significantly since the Conservative Party secured a landslide victory in the UK general election last December, giving RBS and its peers a degree of clarity over the country’s future relationship with Europe.

However, investors are eager for an update on RBS’ underperforming businesses like Ulster and NatWest Markets, as well as details on its new digital bank Bó.

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Barclays Capital downgrades RBS to ‘underweight’

Analysts from Barclays Capital downgraded RBS from ‘equalweight’ to ‘underweight’ in January, though opted to leave their target price for the stock unchanged at 225p.

Based on RBS trading at 225p as of 14:50 (GMT) on Thursday, Barclays Capital believe that the stock is valued appropriately, though suggests investors should consider reducing their holdings in the company.

Barclays said that its rationale for the downgrade is due to the bank continuing to see net interest margin pressure, with the restructuring efforts to support underperforming NatWest Markets and Ulster units likely to take time before bearing fruit.

‘RBS has been sustaining high returns in recent years; however, our analysis suggests net interest margin headwinds are under-appreciated (particularly if the Bank of England cuts the base rate on 30 January 30) and RWA inflation will also likely drag,’ Barclays Capital said in a note.

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Last week, the Bank of England (BoE) opted to leave interest rates unchanged at 0.75%, despite early signs of the UK economy picking up.

‘To be clear these are still early days and it's less of a case of so far so good than so far good enough,’ governor of the BoE Mark Carney said in reference to the health of the UK economy.

‘Although the global economy looks to be recovering, caution is warranted," he said. "Evidence of a pick-up in growth is not yet widespread.’