RBS shares climb on talk activist fund TCI is moving in

SPECULATION that activist hedge fund The Children's Investment Fund (TCI) is building a stake in Royal Bank of Scotland sent the bank's shares bounding up 8 per cent yesterday.

Analysts said yesterday's speculation among traders, who had noticed stronger volumes in RBS shares, came at an opportune time for the bank, ahead of the deadline for its massive rights issue this Friday.

Trading volume in the stock was strong as the talk took hold, with more than 400 million shares changing hands. Recently RBS's shares had drifted down to within about 25p of the 200p rights issue price, but yesterday they closed up 18.7p at 244.75p.

An RBS spokesman said: "We never comment on share-price rumours because it is fruitless." TCI was unavailable for comment.



The secretive hedge fund, headed by financier and philanthropist Chris Hohn, is understood to have made donations of nearly £400m to the Children's Investment Fund Foundation, set up by Hohn and his wife five years ago.



Ironically, it was TCI that campaigned for change within ABN Amro last year, leading the Dutch bank eventually to succumb to a £58 billion sale to RBS and its partners, Banco Santander of Spain and Belgo-Dutch bank Fortis.

TCI's intervention helped prompt the break-up of ABN and it may see similar potential at RBS, whose shares have underperformed sharply this year.

One analyst said yesterday: "Such a stake-building by TCI would not surprise me. After all, they were the prime mover in the destabilisation of the ABN board, and they would be jumping on a large bandwagon that is rolling already."

These remarks were a reference to reports that Schroders has been seeking to remove either or both of RBS chairman Sir Tom McKillop and chief executive Sir Fred Goodwin from the board because of a perceived recapitalisation U-turn. A Schroders spokesman said that the fund manager was holding "one-to-one dialogue" with RBS, but that the substance of those conversations "remains private".

The stakebuilding speculation added fuel to a share-price rise underpinned by the approach of the end of RBS's rights issue period on Friday, dealers and analysts said. The shares appear set to hold above 200p and there is optimism they could benefit when the rights period ends.