UK banking sector escapes overhaul, shares rise

Blue-chip UK banks rallied today after the sector escaped a radical overhaul in a key government-commissioned report.

UK banking sector escapes overhaul, shares rise

Blue-chip UK banks rallied today after the sector escaped a radical overhaul in a key government-commissioned report.

A positive start to trading on Wall Street added to investor optimism after the Independent Commission on Banking (ICB) proposed better-than-feared changes to improve stability and competition.

With Barclays, Lloyds Banking Group and Royal Bank of Scotland up as much as 4%, the wider FTSE 100 Index added 3.5 points to 6059.3.

America’s Dow Jones Industrial Average lifted in early trade following deal news over the weekend, while the market was also hoping for a decent upcoming first quarter earnings season.

In London, the focus was on the bank industry after the ICB stopped short of an outright break-up of their retail and investment operations.

It has instead proposed firms such as Barclays should ringfence their retail arms and bolster capital ratios in those operations.

Barclays added 11.4p to 308.5p and Royal Bank of Scotland rose 1.5p to 44.9p, as it emerged that banks could continue to transfer capital between divisions as long as their retail banks met the 10% capital requirement.

Even Lloyds Banking Group, which is facing the prospect of having to divest more than the 600 branches originally proposed by the European Commission, rose by 0.5p to 62.7p.

Its chief executive, Antonio Horta-Osorio, said the extension to the sale programme was not in the best interests of customers and may even result in a delay in a new competitor coming into the UK market.

Other top flight risers included GKN after the car parts supplier reported a 14% rise in first quarter sales and said trading profits were up 42% on the same period a year earlier.

While GKN cautioned over the impact of Japan’s earthquake and tsunami on the car manufacturing sector, shares rose 4.5p to 206.9p, a gain of 2% after Evo Securities said GKN had made a “blistering” start to the new year.

Mining giant BHP Billion rose 55.5p to 2641p after Credit Suisse upped its rating on the stock and the company itself downplayed reports it is preparing a multi-billion dollar bid for Australia’s Woodside Petroleum.

Outside the top flight, Pinewood Shepperton’s shares were 4% or 6.5p higher at 192p after the film studios firm said on Friday night that it had received a 190p a share takeover approach from Peel Holdings, which has investments including the MediaCityUK development at Salford Quays.

Peel owns just under 30% of Pinewood and will need the support of investment fund Crystal Amber, which has around 28%. Crystal is thought to be among major shareholders pressing for a price of between 200p and 220p a share.

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