Scotsman.com Business - RBS picks up a bargain

Scotsman.com Business - RBS picks up a bargain: "RBS picks up a bargain HAMISH RUTHERFORD"

RBS

573.5-7.5p

S&N

580p +7.50p

BARGAIN of the day could go to Royal Bank of Scotland, as it revealed that it and its consortium were already part-way down the road in their battle to buy ABN Amro, after building up a stake of more than 3 per cent. They're likely to build on that, too, RBS said.

The move seems to make decent sense on one level. Last week ABN's shares fell heavily on fears over trouble in the markets.

At these times it cannot hurt to exude a level of outward confidence. If Sir Fred Goodwin is really as sure as he makes out that his side is the right one, then buying up ABN shares at a time when they are so cheap is simply saving money.

The value of Barclays' offer rises and falls with the value of its shares, which have fallen in recent times. Yesterday, it too fell under the subprime radar after Panmure Gordon analyst Sandy Chen said that his focal point among UK banks for credit market concerns was Barclays.

He added that he thought there "was a material risk that some of [investment arm] BarCap's counterparties may be in trouble".

The consortium still appears to be in poll position in analysts' eyes, as much for the fact that it is paying more cash than anything else. But both sides are certainly struggling to maintain anything like market confidence in their bids - in a market that has changed dramatically in the past month.

The consortium members' market caps may be falling, but the gap between their bid and Barclays' is widening, leading to the obvious accusation that, again with the benefit of hindsight, they could end up paying more than they need to. There is also growing uncertainty among the markets that Fortis, hit by the subprime crisis and raising a mountain of cash, will be able to come up with its share. Santander is also now believed to be facing exposure to the subprime problems.

With RBS's partners needing to raise so much money at a time when the market it tight, it is hardly surprising that ABN's share price has hardly rocketed on the stake-buying news.

Perhaps it isn't time to panic just yet, but any move that can save a bit on what will be the world's largest ever financial services transaction should surely be welcomed.

In more backhand good news for RBS, perhaps, it seems the factors that have created the opportunity for it to get hold of ABN shares, on what seems to be the cheap, are likely to continue. No matter what the bulls might tell you, the latest troubles are by no means over.

The credit crunch/subprime picture seems to be worsening in New York. Wal-Mart, the biggest retailer of them all, is warning that consumers are likely to spend less this year, and more hedge funds and trusts are struggling to cope with the lack of demand for their services.

Central banks have been pouring a mountain of cash into the markets in the past week, and yet in that time the FTSE 100 is down more than 2 per cent.

With so many of the City's top dogs on holiday at present, the picture they return to could be vastly different to that of a fortnight ago. Stock markets, confronted with such vast extra funding to the financial system, should be soaring. Instead, the Dow fell yesterday, as did the FTSE.

Problem over? I don't think so.