Market Report: Talk of bumper profits lifts RBS above the fray

TALK of bumper profits and a spectacular investment deal lifted shares of Royal Bank of Scotland above the pull of more routine stock market worries.

As interest rate and political uncertainties continued to weigh heavily on sentiment, RBS displayed splendid indifference, climbing 21p to 428p.

Interim results are due tomorrow. Credit Lyonnais Laing, one of the bank's brokers, was said to be making bullish noises, which encouraged the market to expect a dramatic profit increase.

RBS, owner of the Direct Line insurance operation, is known to be trading well. Some profit forecasts for the year top pounds 500m against last year's pounds 265.4m out- turn.

The apparent CLL story was that more had been earned in the first half-year than had been expected and consequently shareholders would be rewarded with a sharp interim dividend increase.

Last year RBS distributed a 3p interim from profits of only pounds 91.6m.

The investment deal involved the highly successful Newton Management. A variety of stories flowed, ranging from a complete takeover to a merger of Newton with RBS's Capital House Investments.

In the event RBS confirmed that talks were in progress - over 'possibilities for co-operation in fund management'. But RBS said it had no 'current plans' to acquire investment management companies.

The bank, also regarded as a likely candidate for a building society acquisition, did manage to accompany the speculation with one deal.

It splashed out pounds 46m on a 2 per cent interest in the struggling Spanish bank, Banco Espanol de Credito. The shares came from Banco Santander, which rescued Credito. Santander has 9.89 per cent of RBS.

For most of the session shares looked decidedly ragged, unsettled by the Government's continuing embarrassment and the spectre of higher US interest rates.

But when it became apparent the Americans were not rushing to lift their rates the atmosphere lightened a little and after suffering a 25.3-point fall the FT-SE 100 index ended 8.2 lower at 3,097.8.

Perversely, the market was encouraged by suggestions that the US authorities would opt for an aggressive half-point increase instead of indulging in the drip, drip of seemingly hesitant quarter- point advances.

But trading was light, with turnover failing to get above the break-even 500 million shares. Government stocks fell by up to half a point.

The anxiety over interest rates and politics was particularly severe on utilities but most enjoyed a strong late recovery.

Cable and Wireless rose 8p to 444p on reports that it planned a break-up that could lead to a flotation of its Mercury telephone offshoot.

Allied-Lyons, results next week, rose 11p to 583p. Bass, another with figures next week, held at 556p as Martin Hawkins of Greig Middleton forecast little- changed interim figures but declared the shares a buy.

Joseph Holt, the family-run Manchester brewer, spurted 80p to 3,255p. The shares are an exceedingly tight market.

Bearish analytical comment took its toll. Hoare Govett said sell Forte, down 3.5p to 224.5p, and Rank Organisation (9p to 408p).

Courtaulds, the chemical group, dropped 16p to 533p, as UBS advised clients to take profits, and Kwik Save, the food discounter, dipped 3p to 572p, with Yamaichi taking a cautious stance.

Bill Myers, Yamaichi analyst, says today's interim results will be pounds 63m against pounds 61m, with the year's figures up from pounds 126.1m to pounds 131m. 'There is concern that the company's basic trading ratios are deteriorating rapidly', he says.

Hammerson, the property group, moved from 405p to 399p as Kleinwort Benson switched from buy to hold.

Lasmo's pounds 219m rights issue enjoyed a 96.5 per cent take-up with the rump placed by Cazenove and NatWest Securities at 146.5p. The shares rose 1.5p to 149p. Other oils were again firm.

The reshaping at Associated British Foods left the shares down 15p at 584p, with the market disappointed there was no hint of a big acquisition such as the food division of Allied-Lyons.

Hillsdown Holdings held at 176p. Barclays de Zoete Wedd is growing more enthusiastic. It has upgraded this year's profit estimate from pounds 180m to pounds 190m and next from pounds 195m to pounds 205m.

Boots and W H Smith, thought to be on the verge of announcing what they plan to do with their troublesome do-it-yourself joint venture Do-It-All, had mixed fortunes.

Fears that Boots might assume full ownership of the chain pushed its shares 9p lower to 553p. Smith was unchanged at 516p.

The newcomer Go-Ahead, the latest bus company to arrive, traded up to 128p, ending at 125p. The shares were placed at 120p.

The FT-SE 100 index ended 8.2 points down at 3,097.8 and the supporting FT-SE 250 index fell 28.9 to 3,742.1. Turnover was 480.6 million shares, one of the lowest this year. Bargains totalled 24,930. The account ends on Friday with settlement on 23 May.

Wedderburn Securities, the re-creation of the old Danbury property business, made its 535 debut with shares trading at 16p and warrants at 6p. The company acquired property from Suter, which now has 26.3 per cent. Wedderburn's fans are encouraged by the sale of property at Braintree, Essex, for pounds 400,000 an acre. It has an option on 32 neighbouring acres.

Wilton, the media minnow featuring Clive Ng, a Malaysian entrepreneur, has raised pounds 1.5m by selling four million shares in Glenchewton, the old Cowan de Groot, at 38p. It still has 18.1 per cent. Scottish Amicable sold 1.2 million shares. Charterhouse Tilney placed the stock, representing 20.2 per cent, with institutions, at 38p. Wilton held at 3.75p and Glenchewton at 42p.

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