UK banking shares heading for further losses

Banking shares were today heading for a second successive session of losses amid renewed speculation over the state of Barclays’ balance sheet.

Banking shares were today heading for a second successive session of losses amid renewed speculation over the state of Barclays’ balance sheet.

The group unveiled a £1bn first quarter write-down due to credit market difficulties and said it was still considering its fundraising options, including the possibility of a rights issue.

Its update came after Bradford & Bingley’s shock £300 million cash call yesterday, and took the shine off otherwise upbeat trading which saw the FTSE 100 Index rise 26.2 points at 6242.2 by lunchtime.

Royal Bank of Scotland was the biggest faller with a 14% fall, or 44.75p, to 274.5p after its shares began trading without the rights to new stock offered by the bank in its cash call last month.

Even though Barclays made no mention of its own rights issue, the fact that first quarter profits were lower than last year dampened the mood.

Britain’s biggest mortgage lender Halifax Bank of Scotland was 6.5p lower at 4463.75p, or nearly 2%. Alliance & Leicester fell 7.5p to 438p and Lloyds TSB 3.5p off at 407p.

Among the Footsie’s risers, Cadbury jumped 4%, or 28.5p to 675.5p, after it said sales growth had been stronger than expected in the first half of its financial year. Brewing firm SABMiller followed with a gain of 50p to 1253p, after a 15% rise in adjusted full-year profits exceeded market expectations.

BT was among the top performers after the former monopoly revealed a 3% rise in annual underlying profits to £5.78 billion. Departing chief executive Ben Verwaayen said he was bowing out on a high, and shares were nearly 5% up, or 10.5p to 233.75p.

Cairn Energy was another leading riser after an upgrade from UBS lifted the stock 5%, or 164p, to 3552p.

In the FTSE 250 Index, investors were underwhelmed by plans to revive Currys owner DSG International through cost cutting and closing stores. Shares in the company were 8% lower, or 5.5p, at 63.75p.

WH Smith was not far behind, down 14p to 403.5p, after Citi downgraded the retailer to a hold and said it was concerned about the lack of near-term trading catalysts.

ITV was also on the back foot despite executive chairman Micheal Grade telling investors that a turnaround plan was on track, with net ad revenues up 2% in the first three months of the year. Shares in the broadcaster dipped 0.7p to 62.2p.

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