Banking stocks dominate Footsie risers

Banking stocks dominated the list of blue-chip risers today as investors prepared for a significant week in the beleaguered sector.

Royal Bank of Scotland led the way with a rise of 14% after reports at the weekend said it will use results on Thursday to announce the creation of a bad bank for billions of assets deemed suitable for disposal.

The FTSE 100 Index was in positive territory, up 19.8 points at 3908.9 by mid-morning. World markets were sharply lower on Friday, but sentiment improved after reports said the US government had no plans to nationalise Citigroup.

RBS shares bounced 2.9p to 22.2p, while Lloyds Banking Group was up 4.6p at 60.9p and Barclays lifted 7.1p to 102.3p.

The gains came as the British government prepared to announce details of its asset-protection scheme, which aims to protect banks against further losses. Attempts to kick-start the housing market through a return to lending by Northern Rock also added to the positive mood in the sector.

Insurers were higher, with Legal & General up 11% or 3.8p to 38.6p, Aviva 14.5p ahead at 305p and motor specialist Admiral 30p stronger at 839p.

Prudential, which has reportedly discussed interest in its UK business from insurance tycoon Clive Cowdery, rose 8.25p to 293.25p.

In corporate news, Associated British Foods lost an initial gain seen after it announced further strong trading by retail division Primark.

Analysts focused on weaker trading in AB Foods’ Twinings grocery arm and the prospect that the group could post lower half-year operating profits.

Shares were down 4p at 641p.

But the statement had a positive impact on Northern Foods, which rose 2.5p to 51.75p.

Elsewhere in the top flight, housebuilders were making gains ahead of results this week from Redrow and Barratt Developments. Barratt added 3.5p to 74p.