RBS jumps on Qatar stake talk, dividend optimism

LONDON (Reuters) - Royal Bank of Scotland <RBS.L> shares jumped over 5 percent on Monday on hope that Qatar's sovereign wealth fund could take a stake and the expectation it will lift its dividend and post strong results this week.

Qatar's prime minister, who heads the country's $60 billion sovereign wealth fund, told Reuters he is looking to spend between $10 billion and $15 billion over the next two years on bank stakes to diversify the country's economy from oil and natural gas.

Sheikh Hamad bin Jassim al-Thani said he favored investing in European lenders because U.S. bank stocks are likely to fall further on subprime-mortgage writedowns.

The Sunday Telegraph newspaper said the wealth fund was considering investing in RBS, citing people familiar with the Qatar Investment Authority's plans.

By 0340 EST, RBS shares were up 5.4 percent at 398.5 pence ($7.83), after hitting 405p, their highest level for three weeks. The shares have tumbled by over a third since the end of June amid fears about the scale of potential writedowns and the impact of a slowdown in capital markets.

The shares were also lifted by rising optimism ahead of RBS's 2007 results on Thursday. The bank's full-year dividend payout is forecast to rise 10 percent from a year before, according to the average of a Reuters Estimates analyst poll.

RBS is expected to raise its writedown on assets related to risky products, but operating profits are forecast to rise 9 percent to over 10 billion pounds. The profit and dividend rises should ease concerns about its capital position, analysts said.

Other banks shares were also strong in a resurgent broader share market. Smaller banks Alliance & Leicester <ALLL.L> and Bradford & Bingley <BB.L> each rose over 5 percent on speculation they could be takeover targets for Lloyds TSB <LLOY.L>.

(Reporting by Steve Slater; Editing by Erica Billingham)