While an upcoming LIBOR settlement at Royal Bank of Scotland (RBS) may just be a drop in the ocean compared with last year's PPI redress, Investec has retained its 'sell' recommendation on the stock.

The broker reckons that regulatory fines for traders' attempted LIBOR manipulation will not be material with RBS expected to be settle at £400m. However, media reports suggest an even lower amount.

"This pales into insignificance when compared with Payment Protection Insurance [PPI] for which RBS has already provided £1.7bn and Lloyds [also rated 'sell'] £5.3bn and counting," said analyst Ian Gordon.

He said that for RBS's fourth quarter, regulatory costs/redress, increased restructuring costs, flat Non-Core losses and an elevated tax charge results in its forecast for an attributable loss of £1.4bn.

Gordon said: "In 2013-15e, we see a return to profit with a modest improvement in core profitability (despite an offset from EC-mandated business disposals).

"However, with a very weak outlook for RoE [return on equity], we remain sellers."

Nevertheless, the broker has raised its target price for the stock from 265p to 290p.

RBS's shares were down 0.74% at 329.94p.

BC

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