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Royal Bank of Scotland (RBS) 407p

The bank reports full year figures in a couple of weeks time (28 February) and concerns over the need to strengthen its capital base are sure to capture the market’s attention. It looks unlikely to go as far as cutting the dividend but market gossip suggests the sale of a number of assets could be on the cards, possibly its stake in Bank of China. The shares started this week with a 4% rally, and alternative ways to bolster its balance sheet are the topic of some discussion. Jonathan Pierce, an analyst at Credit Suisse, believes these could include buying well-capitalised US operations or introducing strategic investors, but a more logical move would be a rights issue, a move that could easily have the shares hitting the skids again. This, coupled with an announced £1.1 billion write-down in ‘risky assets’, which could be even heftier when confirmed in black and white, could spark many investors to head for the exit and place renewed pressure on the stock, with the 340p level touched at the end of last year possible.

ACTION: SELL RBS • Target 366p • Stop Loss 430p

TIME TARGET: 4 WEEKS