RBS shares up 5 percent on alternative plan to Williams & Glyn sale

LONDON (Reuters) - Royal Bank of Scotland Group shares rose 5 percent on Monday, after the lender said on Friday evening it had proposed abandoning the disposal of its Williams & Glyn business after a seven-year struggle to sell the unit to meet European Union state aid demands.

RBS instead put forward an alternative series of measures, worth around 750 million pounds ($932.48 million), to help newer, smaller "challenger" banks and boost competition among lenders.

Analysts said that removing the obligation to dispose of Williams & Glyn could pave the way for RBS to resume paying dividends, but cautioned that the new proposals did not look too favourable for the taxpayer-backed lender.

"Overall the prospective deal looks better for the 'eligible challenger banks' than for RBS," Joseph Dickerson, analyst at Jefferies, wrote in a research note on Monday.

(Reporting by Lawrence White; editing by Jason Neely)