UK banking stocks rally

Banking stocks rallied higher today amid reports over UK government plans to offload its bank stakes.

Banking stocks rallied higher today amid reports over UK government plans to offload its bank stakes.

Part-nationalised Royal Bank of Scotland was one of the leading risers – up 5% - as investors cheered speculation the government may look to recover some of the British taxpayer’s £70bn (€82bn) investment even before a marked improvement in their share prices.

The wider FTSE 100 Index also closed in positive territory, up 25.1 points at 4461.9, buoyed also by a strong opening on Wall Street.

America’s Dow Jones Industrial Average rose nearly 1% at one point, with more upbeat news on the economy as data revealed the number of jobless dropped more than expected and retails sales rose.

But in London, the Footsie still failed to break the 4,500 barrier – a level proving hard to sustain after the commodities-based rally earlier in the week.

Oil firms in particular gave back recent gains, with Royal Dutch Shell off 28p at 1697p and BP down 8.75p at 524.25p.

Barclays topped the risers board as the banking sector was lifted amid speculation around how UKFI – the British government body responsible for taxpayer stakes in the state-backed banks – could recover part of the country’s investment.

One theory is that a convertible bond would allow UKFI to sell RBS and Lloyds stock at a premium to the prevailing price, potentially profiting on the investments before the shares have returned to the government’s entry level.

Shares in taxpayer-backed banks RBS and Lloyds Banking Group gained 1.8p to 39.7p and 1.7p to 66.7p respectively following the report in the Daily Telegraph. Meanwhile HSBC gained 12.25p to 548.25p.

The main corporate news of the session came from Home Retail Group after it reported the first positive sales figures from its Homebase DIY chain in two years. The demise of MFI and Woolworths helped trading and shares rose 5p to 271p.

The mood was positive elsewhere in the sector as hopes the recession may soon be over lifted consumer-related stocks.

Tesco rose 5.7p to 363.3p ahead of a trading update next week and in the FTSE 250 Currys owner DSG International gained 1p to 27.25p.

But back in the topflight, B&Q owner Kingfisher failed to benefit as shares slid 3.4p to 193.6p.

Meanwhile, shares in travel group Thomas Cook continued to show volatility following the collapse of its principle stakeholder, German retail group Arcandor. The stock was 2.75p higher at 221.75p, a gain of over 1%.

Outside the top flight, climate change consultancy AEA Technology rallied almost 8% or 1.75p to 24p after it said strong American demand had boosted its order book to more than $2bn (€1.418bn)

The biggest Footsie risers were Barclays up 16p at 304.5p, Invensys up 12.5p at 241.5p, Royal Bank of Scotland up 1.8p at 39.7p and Aviva gaining 14.5p at 364.75p.

The biggest Footsie fallers were Carnival down 38p at 1519p, Anglo American down 33p to 1762p, British Airways off 2.6p at 143p and Kingfisher down 3.4p to 193.6p.

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