In a note entitled "Time to take profits? Now one only for the 'courageous'", Ian Gordon of Investec Bank suggested it could be years before RBS achieved the kind of profits required to trigger a notable increase in its share price.
Days after RBS posted a £1.4 billion first-half profit and confirmed New Zealander Ross McEwan would succeed Stephen Hester as chief executive in October, Mr Gordon said the bank appeared to be firmly on the road to recovery.
However, he warned that the costs of an "apparently endless" process of restructuring at RBS look set to continue to take a heavy toll on earnings at the bank, which received a £45bn bail- out from the Government in 2008.
The restructuring has involved selling off or reducing the bank's exposure to non-core businesses, which some experts have said should be spun off into a separate "bad" bank.
Mr Gordon believes RBS is likely to make only modest returns on the huge amounts of capital tied up in the business in coming years.
"RBS shares have [understandably] responded well to the appointment of new CEO Ross McEwan, and a wave of speculation that the worst excesses of the Government's threatened 'good bank/bad bank' split may yet be avoided," wrote Mr Gordon.
"We hope sense will prevail and that this proves to be the case. However, we still believe that even the current status quo offers a painfully slow pace of recovery."
Mr Gordon said RBS's share price implied a full valuation that appeared to be ahead of actual recovery and rated the stock a sell.
At the weekend, Vince Cable said he believed there was little prospect of any sale of the Government's 81% stake before the next General Election in 2015.
The Business Secretary said it is probable the state will have a stake for the majority of the next parliament as well.
Mr Cable said the Government would have to weigh up the potential benefits of breaking RBS up, with the significant costs that would entail.
Shares in RBS closed up 1.6p, or 0.5%, at 342.2p.
RBS declined to comment on Mr Gordon's note.
Mr Gordon concluded his analysis by picking an alternative bank and added: "Standard Chartered is, by far, our preferred play in the UK bank sector."
The taxpayer paid 500p a share for RBS shares, which are valued at 407p on the Treasury's books.