THE fireworks were really set off at Royal Bank of Scotland last week when a letter from the chief executive was sent to staff warning them that any bonus was to be deferred until later years.

While some might applaud this action, headhunters were suddenly deluged by CVs from disgruntled traders looking to jump ship.

The company is walking a fine line between adhering to the harshest line on pay of any bank in the world, and risking losing their best talent.

This talent is badly needed to make the profits to enable RBS to return to profit, and to provide the Government with an exit and a profitable return on its stake in the bank.

RBS reported a thirdquarter update on Friday which, although a loss, was much better than expected, as the rate of deterioration of its bad loans improved dramatically.

At the same time, Lloyds Banking Group escaped relatively unscathed from the European Commission’s demand to offload certain assets.

It was obvious with Halifax, Cheltenham and Gloucester and Lloyds in the same high streets in England and Wales, and Bank of Scotland and Lloyds in the same high streets in Scotland that branches were to be disposed of.

The fact that Lloyds has four years to implement the process allows it time to gauge the right price to sell these assets.

As predicted, Lloyds escaped having to enter the asset protection scheme, albeit at a high cost, but saved surrendering a further stake to the Government. A rights issue to raise capital, again predicted, will be formally announced at the end of the month. While the amount of money being raised is known, and will take the record from HSBC as the previous biggest rights issuer, the exact terms will not be known for a fortnight.

Lloyds is important because it has the largest number of private shareholders of any UK company.

Much speculation centres on the price at which the rights issue will be set.

The consensus appears to be in the deeply discounted range of 30p to 45p, providing an attractive take-up level. Some are going further, and pointing to a technical change in the nominal value, which could allow the new shares to be issued at as low as 15p. Now that would have some serious interest.

The toxic debt at banks is mainly loans to commercial property businesses.

As mentioned before, though, the value of commercial property is soaring as available properties get snapped up in a newly competitive market.

Clearly, as values recover, the toxic debts recover.

The UK stock market has had a few wobbles of late, but would appear to have a support level at about 5000, that is to say that more money comes into buy shares in the market, should the FTSE drop to this level.

Economic news has been mixed, with some disappointments earlier in the month, only to be followed by more encouraging news of late.

This has seen the stock market rally higher.

It has been made clear that interest rates will stay low until employment figures significantly improve and/or inflation becomes a feature again. Until matters change, this remains a good backdrop for further improvement in equity markets.

■ Anthony Platts is a divisional director in the Teesside office of Brewin Dolphin, and can be contacted on 0845-213-1340. All prices quoted in the article are from public sources. The views expressed are not necessarily held throughout the Brewin Dolphin Group. You should bear in mind that no investment is suitable for all circumstances and it is important to seek expert advice if in any doubt.

Brewin Dolphin Limited is a member of the London Stock Exchange, authorised and regulated by the Financial Services Authority.