Investors bought Royal Bank of Scotland (RBS) shares on Thursday 12 January as the group revealed its cost-cutting plans.

The bank's stock rose almost 7 per cent in initial trading after it confirmed the loss of 3,500 jobs as it sells and shrinks parts of its investment bank over a three-year plan to further reduce risk.

The 83 per cent taxpayer-owned group said it will exit from cash equities, corporate broking, equity capital markets and mergers and acquisitions businesses.

It aims to cut the balance sheet of its former global banking and markets business by £120 billion to £300 billion in the next three years under the plan.

The job losses, which will be split between its UK and international offices, come on top of 2,000 cuts announced earlier and come on top of the 30,000 employees axed over the last two years, 22,000 of whom were based in the UK.

RBS chief executive Stephen Hester said that for the cost-cutting strategy to be effective it must adjust to fresh challenges, adding that particularly in the wholesale banking arena, significant new pressures have emerged.

'The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in. Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall,' he said in a statement.

The bank is likely to sell off further parts of the business, including corporate broker Hoare Govett and the share dealing and mergers and acquisitions arms which were set up and expanded by disgraced former boss Fred Goodwin.

This was written for our sister website, Interactive Investor