RBS remains a multi-year recovery story, Investec's Ian Gordon says

Investec's Ian Gordon hailed Royal Bank of Scotland's latest set of quarterly results but reiterated his 'hold' stance on the shares.

The lender "very much" continued to be multi-year recovery story, Gordon explained in a research note sent to clients.

Nevertheless, he conceded that RBS had "travelled well" into the results, adding: "but this looks to be entirely justified and the shares should go better today."

As he pointed out, underlying profits of £1.69bn were 59% ahead of the company-compiled consensus, tangible net asset value was up 3p to 300p on the quarter, impairments were 56% better than consensus, negative revenues within Capital Resolution were £101m better than consensus and NatWest Markets continued to perform "extremey well".

On the flip side, on his estimates RBS's tNAV would decline in the backhalf of 2017, troughing at about 290p but improving after that point.

Furthermore, return on tangible equity was seen improving from -0.9% in 2017 to 10.3% in 2020, which was a "shade" below the 12.0% the lender was aiming for.

The analyst therefore kept his target price at 260.0p.

"For all the welcome progress, we believe that RBS very much remains a multi-year recovery story."