Assurances by The Royal Bank of Scotland's chief executive Sir Fred Goodwin that the bank is not seeking more acquisitions or to issue more shares to fund them, failed to calm nerves in the City yesterday.
A 14 per cent rise in halfyear profits, accompanied by a 15 per cent dividend increase, didn't stop the shares closing with a 75p loss at 1628p after plunging to 1559p earlier in the day.
The Royal Bank has been plagued with reports since April that it is planning to take a stake in the Bank of China, a step many analysts regard as a risky distraction.
Sir Fred refused to deny this yesterday, saying he never comments on speculation. He said only that his bank's stake in Banco Santander, now the owner of Abbey National, could be sold when investment conditions seemed right.
He insisted that his policy is to maintain the Royal Bank's "risk envelope", turning down unduly risky projects even if they appear to be justified by exceptionally attractive potential rewards.
"Some types of risk are just too great regardless of the reward," Sir Fred said. "There's no point in making a lot of money if it keeps you awake at night."
Other directors insist that the Royal Bank will never take a minority stake as a passive investor, only as a route to joint ventures, where it can use its skills. The attraction of the Bank of China is that it could open access to Royal Bank credit cards and possibly corporate finance expertise in its huge home market.
At home, the Royal Bank set aside £278 million for bad debts on credit cards - 46 per cent of their contribution before provisions for bad and doubtful debts and £70 million more than in the first half of last year. That increase accounted for all the rise that carried provisions across the group to £874 million.
Total income for the halfyear was 15 per cent ahead generating a profit of £3.688 billion and adjusted earnings per share eight per cent higher at 86.7p
The best performance came from corporate lending as large companies turned to the bank to finance deals, which they intend to fund later on by issuing medium-term bonds.
This offset the slowdown in UK consumer lending and lower provisions from corporate lending offset some of those on credit cards.
Boosted by the acquisition of Charter One, the US operation Citizens contributed $1.4 billion, 79 per cent more than at the same stage last year.
Sir Fred stressed the diversity of the Royal Bank's activities. The UK accounts for 63 per cent of its operating profit and the US for 27 per cent - a change from 85 per cent and ten per cent in 1999. Retail markets now generate 32 per cent of the bank's income.