RBS perked up in mid-morning trades on the back of news that it plans to hive off unprofitable business customers to a separate division.
This lifted RBS above the rest of the banking sector, which was enjoying a rally on a note from JPMorgan that it remains overweight on investment and credit banks.
The bank was the top FTSE riser, up 1.7p, or 4.49 per cent, to 39.6p, closely followed by Lloyds, up 2p, or 3.08 per cent, to 67p.
The FTSE 100 traded flat during the morning, up only 23.27 points, to 4,460.2 as banking sector gains were offset by falls in commodities. Last night’s 24-point fall on Wall Street had already cast a shadow from the opening.
Oil companies retreated after recent gains, despite oil prices rising for a third day, above $72 a barrel and hitting an eight-month high in New York on the back of a larger-than-expected drop in US crude inventories.
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Royal Dutch Shell was one of the biggest losers, down 28p, or 1.68 per cent, to £16.97.
Thomas Cook, the travel group, was one of the leading top blue-chip risers, up 5p, or 2.28 per cent, to 224p, as traders continued to speculate about the 52.8 per cent stake held by Arcandor, the collapsed German retail group.
Findings from the National Institute of Economic and Social Research (NIESR), the leading economic think-tank, that the UK economy could emerge from recession soon gave strength to the pound. Sterling climbed to its highest level in more than six months to reach €1.174.