RBS leaps 7pc as investors cheer bank branch U-turn

ROYAL Bank of Scotland defied expectation yesterday, soaring after it cancelled the sale of its Williams & Glyn branches.

Shares in the struggling bank were widely predicted to bomb this week ahead of its results on Friday, when the group is expected to confirm a ninth consecutive year of losses.

RBS, which the Government still has a 72pc stake in, had been told to offload its 300 Williams & Glyn branches to meet EU State Aid requirements after it received a £45bn taxpayer-backed bailout in 2008. But it has struggled to find a buyer. Both Santander and Clydesdale had been among bidders but no deal was ever made.

Clydesdale last night formally withdrew its bid.

But now the Treasury has stepped in to change the requirements. The bank will now deliver a £750m package of remedies to promote competition in the market, which would see it working with challenger banks. Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: ‘This means the years of toil and billions spent trying to divorce its Williams & Glyn division have achieved almost nothing. It’s a mark of how bad things have been for the bank that despite a tough alternative agreement shares have still risen. The new agreement should at least be achievable.’

A possible downside, however, is that the group will no longer benefit from the proceeds of the sale.

Investec increased its target price by 20p to 225p on the announcement, but kept its ‘sell’ rating. Shares surged 6.8pc, or 16.5p, to 258.9p.

The FTSE 100 finished fractionally lower at the close, down 0.1 points at 7299.86.

Among the highest risers on the day was Rolls-Royce, which revved up as Goldman Sachs upgraded it to a ‘buy’. Analysts expect earnings to improve and added the stock to its conviction list. Shares climbed 6.3pc, or 42p, to 708p.

Pearson slipped after Berenberg downgraded it to a ‘sell’.

Analysts slashed 100p off their target price to 400p as they said one of the firm’s major divisions faced problems and had more leverage than had been assumed.

Berenberg said it couldn’t see a short-term fix for Pearson’s higher education courseware business and couldn’t see any ways the firm could save any more cash.

Pearson will publish its full-year results on Friday. Shares fell 3.9pc, or 26p, to 642.5p. Coloured gemstone miner Gemfields tumbled as it reported a £10.9m loss in the six months to December 31.

The firm blamed the deferral of an emerald auction which had been due to take place in December. Gemfields produced 10.7m carats of rough emerald and beryl at its Kagem mine, down from 15m in the previous year.

Ruby and corundum production climbed to 5.6m carats at its 75pcowned Montepuez mine, up from 2.1m carats in 2015.

Gemfields said a demonetisation programme in India had created uncertainty, but prospects were strong over the long term with an increasing demand for responsibly sourced rubies and a resurgence of colour gemstones in the luxury sector.

Shares spiralled down 4.9pc, or 2.5p, to 48p. Condor Gold climbed on plans to raise £5.24m from investors to help it further develop its gold mine in Nicaragua. The gold miner is placing around 8.3m shares at 62p each. Leading the backers is renowned mining investor Ross Beaty, who has snapped up £1m of the placing.

The move will increase his stake in the firm to 8.7pc, making him the largest shareholder. Shares leapt 3.1pc, or 2p, to 67p.