Shares in Royal Bank of Scotland rise 5.1 percent to the top of thepan-European FTSEurofirst 300 index on reports minority shareholderscould block a break-up proposed by the UK government and seen asvalue-destructive by analysts.
The UK chancellor George Osborne's potential plan to split RBS into good andbad banks could be blocked by institutional investors, who would have a veto onthe transaction, The Times reported over the weekend, citing legal sources.
Minority shareholders, which own 19 percent of RBS's share capital, wouldlikely vote against a bad bank, which they may need to recapitalise after thesplit.
"Although we regard the Chancellor's separatist agenda as overtly negative,we take considerable comfort in terms of damage limitation from the requirementfor minority shareholder approval," analysts at Investec say in a note.
"RBS shareholders will surely not allow themselves to be used as 'turkeysvoting for Christmas'?"
They reiterate their "buy" recommendation and 310 pence target on the stock,citing the "exceptional progress" made by RBS under former CEO Stephen Hester inreducing the size of its bad loan book as further evidence of "the futility ofany separation".
RBS's shares extend a rebound from three-month lows hit last week, withinvestors snapping up the stock as it trades at 290 pence, or 10 times itsexpected earnings for the next 12 months, Thomson Reuters data showed.
It traded at multiple of 13.6 in May, before a 24 percent share price slide,which gathered pace when Hester was ousted in mid-June.
Traders say RBS's shares are also boosted by speculation foreign investorswere considering buying up to half the British government's stake in LloydsBanking Group, helping revive investor interest in UK banks.
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