So, the market is continuing to try and work out the value of RBS in light of their results published last week.
The RBS interpretation was that they were on track for re-building the bank. Their share price had been improving over the last year as they gradually started to address their ills under new CEO, Stephen Hester. He pointed to the improving 'under-lying' profits of their 'core' business' as an indicator of good things to come. This seemed to confirm the idea that the bank would be ready to re-privatise over the coming 12 to 18 months.
The fact that there had been a fairly small improvement in operating profits, was not good enough for the markets. That profit was turned into a huge net loss after adjustment for a variety of fines, provisions and adjustment for market based credit spreads. And it is this net profit that seems to have driven market sentiment since last Thursday's figures.
The gap between the RBS share price and the target price of £5.00 that most feel would be needed to justify a re-privatisation has been widening. Last Wednesday's price had been hovering around £3.45 for some time and had actually been rallying in advance of the results. The disappointment of Thursday saw an immediate down grade as the results were released and have fallen even further threathening to fall back below £3.00.
Their share price needs to surge by 66% over the coming year to make it a real candidate for re-privatisation or at least need to be in sight of that price to announce a sell-off. If last week's results were meant to show that there was light at the end of the tunnel it must be disappointing to all involved that the market decided to make the size of the task even bigger.
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