RBS surges on hedge fund stake

Shares in Royal Bank of Scotland surged more than 8% on the back of talk circulating in the Square Mile that a British hedge fund is building a stake in the bank.

As RBS's £12bn rights issue enters its final phase ahead of Friday's close, it is understood that activist investor TCI has been buying shares and may push for a break-up of the FTSE 100 company.

TCI helped spark the sale of Dutch bank ABN Amro last year. A consortium led by RBS bought ABN for £49bn, in the world's biggest bank takeover - a deal that looks expensive.