BEST OF THE BROKERS

ROYAL BANK OF SCOTLAND
Goldman Sachs rates the bank “neutral” and has raised its target price from 25p to 30p. The broker thinks the plans to restructure RBS Global Banking and Markets could hit earnings per share by six per cent, but raise returns on equity by 1.2 per cent by 2014. But it notes that the wide range of possibilities for the overhaul, and the prospect of economic headwinds. Goldman thinks other UK banks will follow in RBS’s footsteps and restructure.

ROLLS-ROYCE
JP Morgan Cazenove has downgraded the engineer from “overweight” to “neutral” and has raised its target price from 771p to 832p. The broker warns that the engineering market is complacent about possible headwinds in the civil aerospace and defence sectors as operations in Iraq and Afghanistan come to an end and new plane engines are developed. But Rolls’ recent sale of its IAE stake has driven up earnings forecasts by 10 per cent.

HOME RETAIL GROUP
Singer rates the retailer “sell” with a target price of 58p. The broker is disappointed by the Argos owner’s Christmas performance, and has downgraded its pre-tax profit forecast by 12 per cent to £100m for the year. Singer remains cautious about a recovery in UK consumer spending, and it expects Argos’s new boss to make radical changes. It notes that around 40 stores are due for lease expiries or breaks each year for the next five years.