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Royal Bank of Scotland falls to the bottom of Britain's benchmarkFTSE 100 index in chunky volume, which traders attribute to commentsfrom Finance Minister of a possible break-up of the bailed-out bank.
George Osborne told The Daily Telegraph in an interview that his ministrywas actively looking at breaking up RBS to create a "bad bank" to house itsproblem loans.
While some brokers, such as Numis Securities say that splitting up RBS inthis way might be a good idea in the long run as it would strengthen thecompany's core banking business, the shares react to near-term uncertainty.
"A break-up causes uncertainty, and that's hitting the shares," says EGRBroking managing director Kyri Kangellaris.
Analysts add that the shares are also being impacted by a tentative $13billion deal reached by JP Morgan with U.S. authorities to settleinvestigations into bad mortgage loans sold before the 2008 financial crisis,since RBS also had an exposure to this area.
RBS shares are down by 5.1 percent at 354 pence in morning trade, making thestock the worst-performer on the FTSE 100 which is up by 0.2 percent. Volumes onRBS come in at 102.5 percent of the average 90-day amount, above those for theFTSE where volumes stand at 13 percent of the average 90-day amount.
Investment bank Nomura keeps a "reduce" rating on RBS, whose shares haverisen by around 9 percent since the start of 2013.
"Group faces considerable challenges to get back to profitability, which wefeel will take a long time," it writes in a note.
RBS is the 20th most shorted stock on FTSE 100, with 7.7 percent of itsshares that are available to borrow out on loan, which is more than the index'saverage of 4.6 percent, according to data from Markit.
Short interest on RBS shares rose 0.8 percent on Friday, according toMarkit, further highlighting negative sentiment surrounding the stock.
Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net
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