Euro Shares Close Lower as RBS Plunges

European shares closed lower on Monday, led by Royal Bank of Scotland, which dragged down the European banking sector after it said it would report a 2008 loss of up to 28 billion pounds ($41.34 billion) for 2008.

The FTSEurofirst 300 index of top European shares closed down 1.6 percent to 791.23 points, the benchmark's lowest close since Nov. 21, according to Reuters data, after it had briefly been down 3 percent.

Banks took the most points off the index and were the heaviest sectoral loser.

Royal Bank of Scotland plunged 64.3 percent and nearly lost two thirds of its value during today's session, after it announced what would be the biggest loss in British corporate history.

More than 740 million shares in the company changed hands on Monday, more than 9 times as much as the daily average in the past 30 trading days.

"We started out with a bit of optimism, but then the news about RBS came in and the banks issue was back at the centre of attention," said Commerzbank strategist Hans-Juergen Delp.

"The worst is yet to come," he added.

Delp added that it would take some time before markets would be through the financial crisis, saying that more disappointing bank results are looming.

Also in financials, BNP Paribas, Deutsche Bank and Lloyds were all down between 5.7 and 33.9 percent.

The DJ Stoxx banks index was the top sectoral loser, down 8.2 percent.

UK Rescue Plan

Banks also suffered from a lack of detail about the second rescue package by the British government, including the government increasing its stake in Royal Bank of Scotland.

Under the program, banks will be able to insure themselves against losses on their riskiest assets.

"Without a bad bank there is no way out of this," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Germany.

"And we need three of them: one in the United States, one in the United Kingdom and one in Germany," he added, reflecting market disappointment that the UK government responded to RBS's problems by helping the company instead of creating a 'bad bank' to deal with the broader sector's problems.

Pharmaceuticals and biotechnology stocks added most points to the index and the DJ Stoxx healthcare index was the second-biggest sectoral gainer, up 1.1 percent.

GlaxoSmithKline was the top gainer, up 3.5 percent.

Telecoms were up, with Deutsche Telekom rising 2.5 percent, while UK peer Vodafone added 1.2 percent.

Vodafone's Chief Executive Vittorio Colao said the company will strive for strong cash generation and continue to invest in its "jewel" Indian operations in its battle against the global economic crisis.

U.S. markets will remain closed on Monday for a national holiday.

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