Broker Recommendations

LONDON (ShareCast) - Royal Bank Of Scotland (LSE: RBS.L - news) <\b> (RBS) shares were out of favour on Monday morning after the part-nationalised bank issued a statement about the status of its negotiations about participation in the government asset protection scheme (APS).

Broker Charles Stanley said 'the big news in this statement is that RBS will be required to make divestments "not initially contemplated".'

Charles Stanley had been expecting RBS would be forced to reduce its market share in the small business area, 'possibly dispose of its RBS branded branches in England and sell off its insurance brands.' Monday's announcement suggests that the sell-off may be more extensive than that.

'There is also speculation as to whether the fees for the APS and the amount of the assets to be insured will be reduced but that the first loss borne by RBS will be increased,' Charles Stanley analyst Nic Clarke notes.

Clarke (CKI.TO - news) thinks the shares will remain under selling pressure until the bank makes a fuller announcement later this week. The broker's recommendation on the shares remains 'hold'.