Investec has upgraded its rating for Royal Bank of Scotland (RBS) from 'sell' to 'hold', saying it sees a 'speck of light in the gloom'.

"Given the risk of a potentially horrific and dilutive outcome for shareholders after today's Financial Policy Committee meeting, despite a c.20% two-month correction, we are still not yet brave enough to call the bottom," said analyst Ian Gordon.

"That said, at the risk of sounding crass, 'the passing of time' genuinely supports the RBS valuation - i.e. the discount factor that we apply to a (still distant) recovery in group profitability and returns erodes over time. We now believe that RBS shares may return c.1.0% over the next 12 months, which beats a UK or Cypriot savings account!"

For 2014, Investec estimates a return on equity (RoE) of 4.0% and 6.0% the year after - a "slow recovery".

Gordon said that RBS has been "by far" the worst performing UK bank in 2013 to date, and while he still much prefers Barclays and Standard Chartered (both rated 'buy'), the recommendation has been raised and the target price has been lifted from 290p to 300p.

Shares were down 1.24% at 293.61p by 10:49 on Tuesday, extending the year-to-date decline to 9.3%.

BC

Related share prices
Royal Bank of Scotland Group (RBS) share price