RBS Dropped from Best Stock Ideas List

Morningstar equity analysts have dropped Royal Bank of Scotland from their global list of best investment ideas due to concerns around Brexit

Michael Holt, CFA 3 May, 2016 | 9:44AM
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Morningstar equity analysts are removing Royal Bank of Scotland (RBS) from the Best Ideas list of undervalued high-quality stocks. While our thesis that the bank will build up to £20 billion of capital to return to patient shareholders remains intact and we think the shares are attractively priced, we think recent political events in the United Kingdom may mean that the road to get there will be rockier than we anticipated.

We're particularly concerned about the impact of uncertainty about Brexit, which we think has already had a negative impact on economic growth and RBS' ability to sell noncore assets. We think the negative impact is likely to linger on through 2016, even if a no vote prevails as we expect. We prefer to steer investors toward banks with more near-term upside, such as Citigroup, trading at a 29% discount to our fair value estimate.

Which UK Stocks are on the Best Ideas List?

Diageo (DGE)

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Diageo PLC3,190.00 GBP0.00Rating
Kingfisher PLC363.50 GBP0.00Rating
NatWest Group PLC191.00 GBP0.00Rating

About Author

Michael Holt, CFA  Michael Holt, CFA, is a senior stock analyst with Morningstar.

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