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Why M&G’s Felton has bought a significant RBS stake
by Dylan Lobo on Jun 14, 2013 at 12:59
Shares in RBS have come under pressure since the bank announced late on Wednesday afternoon that its chief executive would be standing down as it gears up for privatisation.
The bank lost as much as 8% on yesterday's opening bell before recovering to close down at 3.23%. At 12.30am today shares had lost a further 0.6% to sit on 313.2p.
Felton (pictured) had been buying into RBS through his £660 million M&G UK Growth fund prior the surprise news, on the basis the stock fulfilled the criteria he looks for when identifying opportunities.
‘The bank is almost universally unloved and this is reflected in the share price. After considerably underperforming this year, the stock trades at a discount to the broader market and to its peers,’ Felton told Wealth Manager last month.
Felton also felt the valuation has the scope to recover as credit conditions ease, impairments fall and the bank works through credit scandals.
He also believed the bank looked attractive from a top down perspective, highlighting that the arrival of new Bank of England governor Mark Carney next month could act as a potential tailwind.
‘The UK's large domestic banks are perhaps the most leveraged stocks in the UK market to an improvement in the British economy and could therefore be among the biggest beneficiaries of a more pro-active and accommodative policy regime,’ Felton said.
Having built the position over the few last months, RBS now accounts for 2.4% of the UK Growth fund.
While Felton recognises the good job Hester has done, he believes the bank has time to appoint a suitable a successor.
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