Bank shares dive amid Bradford & Bingley woes

Halifax Bank of Scotland led a sharp decline for blue-chip shares today as investors reacted to the latest blow to confidence in the banking sector.

Halifax Bank of Scotland led a sharp decline for blue-chip shares today as investors reacted to the latest blow to confidence in the banking sector.

Shares in HBOS fell by as much as 14%, while rival Alliance & Leicester declined 9% and Barclays and Lloyds TSB both shed more than 4%.

Bradford & Bingley, which sparked the sell-off by warning of rising levels of mortgage arrears and lower-than-expected profits, saw its share price tumble 28% in the FTSE 250 Index.

Shares in HBOS and Royal Bank of Scotland are being closely watched as both companies are in the process of asking shareholders for extra funding. Bradford & Bingley repriced its rights issue today after the stock fell on Friday to near the level it had been hoping to sell additional discounted shares.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “The news from Bradford & Bingley is not going to improve the jitters in the UK banking sector, particularly as Royal Bank of Scotland and HBOS have their own rights issues to worry about.”

The FTSE 100 Index stood 52.4 points lower at 6001.1, helped by a resilient session for mining stocks.

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