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by Tom Sieber

City analysts have reacted predictably to Royal Bank of Scotland’s £12 billion cash call, issuing a raft of earnings forecast downgrades and slashing price targets.

Sandy Chen, of Panmure Gordon, was particularly severe, reiterating his sell position and cutting his price target from 280p to 195p. He writes: ‘It had been hoped that a big rights issue/write-down/mea culpa would spark a rally. Crunching the numbers, we think the opposite should occur. The issue is value destruction.’

Deutsche Bank’s Jason Napier was slightly less bearish in his assessment but still observed that the rights issue ‘...though significant, does not propel the group above its capital targets in the short term.’ He also cut his target from 480p to 320p.

James Irvine at Dresdner Kleinwort saw ‘headwinds all around’ and downgraded the stock to ‘reduce’ from hold, cutting his target from 500p to 310p. He notes: ‘The balance sheet should look better after this year, but earnings headwinds are still challenging.’

Elsewhere Goldman Sachs cut its price target from 430 to 350p, Credit Suisse from 390 to 350p, Morgan Stanley from 300 to 260p and Lehman from 363p to 305p – piling on the misery for the group’s embattled CEO Sir Fred Goodwin.