RBS resists pressure over key assets as rumours of sell-off hit share price

ROYAL Bank of Scotland appears to be resisting calls to sell off key assets amid persistent speculation that it is reviewing its insurance and overseas operations.

Sources say that apart from the sale of Angel Trains, the rolling stock leasing company, it has no immediate plans to offload any of its major business units.

It is thought to be focusing on a "tidying up" of its newly acquired ABN Amro assets, which is likely to involve the disposal of some of these operations.

But rumours that RBS is planning to sell key divisions, from Direct Line Insurance to its stake in Bank of China, continue to surround the company and is putting downward pressure on its share price.

RBS unveils year-end results on February 28 when it is expected to unveil record profits of about £10bn. It may also announce a further write-down of up to £1bn on the back of the global credit crisis.

Some banking analysts believe RBS requires as much as £12bn to strengthen its balance sheet and restore its capital ratios, but chairman Sir Tom McKillop is believed to have told investors there will be no dividend cut or rights issue to raise capital.

One source said that Angel Trains will not be sold if the bank does not get the right price. It is expected to fetch between £3bn and £4bn.

While the bank appears to be unmoved by the market speculation, investors remain nervous, particularly about a cash call, and have pummelled the shares to a year low. They closed on Friday at 366.5p, a fall of 47% compared with a year ago, which was just ahead of its long pursuit of ABN Amro.

Analysts continue to speculate on the bank's strategy but admit that there is a lot of conjecture in the market. Leigh Goodwin, of Fox Pitt Kelton, said RBS could probably get £7bn for the insurance division but he was doubtful there were buyers in a market that is "bombed out on valuations".

He said: "I doubt they would sell it. I also doubt they would sell (the stake in] Bank of China. It makes no strategic sense."

He suggested that of all its disposable assets, Citizens in the US was arguably the most vulnerable.

One analyst said that selling Angel Trains would make little difference to the bank's needs.



But in a more supportive note, Derek Chambers at Standard & Poor's has discounted the need to raise capital externally.

"We believe that the group should be able to generate sufficient capital internally to increase its core capital ratio from the current admittedly low level," he says. He is targeting a 550p share price and rates the shares a strong buy.