Lloyds and RBS under pressure

Uncertainty over the prospects for Lloyds Banking Group and Royal Bank of Scotland put pressure on shares in the part-nationalised banks today.

Lloyds shed 3% on speculation it could issue new shares to reduce its dependency on the UK government, while RBS retreated 4% after pessimistic comments from chief executive Stephen Hester at the bank’s results on Friday.

Pressure on mining stocks caused the wider London market to surrender much of the boost handed by Friday’s better-than-expected US unemployment figures, with the FTSE 100 Index 32 points lower at 4699.6 by mid-morning.

This remained close to the high for the year set last week.

The impact of a capital raising move by Lloyds on existing shareholders meant shares in the bank fell 3.96p to 98.04p. And investors remained wary over Royal Bank of Scotland after Mr Hester’s comments that a recovery for the bank could take up to five years to complete. Shares fell 2.05p to 44.94p.

Retailers were also prominent on the fallers board, with Marks & Spencer down 9.2p to 340.3p and Tesco 4.8p cheaper at 365.4p, a drop of 1%.

The biggest gain came from Friends Provident after the insurer’s board said it was back in talks over a £1.86bn (€2.17bn) approach from Resolution. With speculation pointing to a possible deal in time for tomorrow’s interim results from Friends, shares jumped 7% or 4.6p to 74.7p.

Other insurers on the front foot included Prudential, which climbed 9.9p to 482.4p ahead of figures later in the week.

Music and games retailer HMV topped the FTSE 250 Index chart after reports said chief executive Simon Fox had ruled himself out of the running for the top job at ITV. Shares, which climbed 5.1p to 121.1p, also benefited from a broker upgrade by HSBC.