RBS shares soar as Government slams brakes on sale of Williams & Glynn division

Embattled bank is required to sell W&G as one of the conditions for the multibillion-pound bailout

Ben Woods
Monday 20 February 2017 15:20
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RBS jumped more than 6 per cent, or 15.8p to 258.2p, following an announcement of the Treasury's proposals
RBS jumped more than 6 per cent, or 15.8p to 258.2p, following an announcement of the Treasury's proposals

Shares in Royal Bank of Scotland soared on Monday after the Government slammed the brakes on the bank's sale of Williams & Glyn (W&G).

RBS jumped more almost 7 per cent, or 16.5p to 258.9p, following an announcement of the Treasury's proposals late on Friday that outlined an alternative £750m plan to boost competition in the banking market in an attempt to appease officials in Brussels.

But while investors cheered the move, the wider FTSE 100 Index struggled to gain traction, slipping 9 points to 7,291.06.

The embattled bank is required to sell W&G as one of the conditions for the multibillion-pound bailout by the UK Government following the banking crisis, but has struggled to strike a deal.

The Treasury has been in talks with the European Commission (EC) for months about the situation and will now seek formal changes to the state aid commitments.

Within the proposed package will be a fund, administered by an independent body, which challenger banks can access to increase their business banking capabilities.

Competition commissioner Margrethe Vestager will propose to the College of Commissioners that they open proceedings to gather evidence on the new plan, which contains a number of measures aimed at helping small and medium-sized enterprises (SMEs).

Across Europe, Germany's Dax was up 0.5 per cent and the Cac 40 in France was marginally down.

The price of oil rose 0.8 per cent to 56.26 US dollars a barrel, but concerns remained over an increase in output from US drilling rigs.

On the currency markets, the pound was largely unmoved after an economic update on Britain's manufacturing industry showed orders had reached a two-year high in February.

The Confederation of British Industry industrial trends survey showed that total order books improved further over the three months to February to a balance of 8%, rising from 5% in January and 0% in December.

The jump was led by demand in the mechanical engineering and metal production sectors, leading to the highest balance since February 2015.

Sterling was up 0.5% to 1.247 against the greenback and 0.5% higher versus the euro at 1.174.

In UK stocks, shares in Unilever slumped after US food giant Kraft Heinz called off its proposed 143 billion US dollar (£115 billion) mega-merger with the consumer goods firm.

The Anglo-Dutch company dropped more than 7%, or 279.5p to 3,518p, following a joint statement by the two companies on Sunday which said Kraft Heinz had "amicably agreed" to withdraw its proposal.

Unilever had issued a strongly-worded rebuttal on Friday after the Chicago-based company tabled an offer representing an 18% premium on Unilever's closing share price on February 16.

If successful, the deal would have been the biggest acquisition of a British company on record based on offer value.

Kraft Heinz brands include Heinz Tomato Ketchup and Philadelphia cheese, while Unilever owns store-cupboard staples such as Marmite, PG Tips and Hellmann's.

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