RBS gets 507 million pounds from 17 percent Direct Line sale

LONDON (Reuters) - Royal Bank of Scotland <RBS.L> sold a 17 percent stake in UK insurer Direct Line <DLGD.L> for 507 million pounds to cut its holding to a minority as part of an acceleration of the state-backed bank's clean-up.

RBS said on Wednesday it had sold 252 million shares at 201 pence apiece, a 4 percent discount to Tuesday's close, taking advantage of a more than 20 percent rise in Direct Line's share price since it was floated last year. By 10:50 a.m. british time, Direct Line shares were down 2.1 percent at 205.7 pence.

RBS sold 34.7 percent of Direct Line at its stock market debut in October and said late on Tuesday it would sell another big slice though a placing with institutional investors. European authorities said RBS must sell at least half of Direct Line by the end of this year, and the latest sale cuts its holding to 48.5 percent.

(Reporting by Steve Slater; Editing by Kylie MacLellan)