UK banking stocks down 10%

Banking stocks tumbled by as much as 10% in the UK today as the panic driving world markets lower showed no signs of easing.

The FTSE 100 Index, which registered its biggest fall of the year yesterday, was down by another 107 points at 5286, a drop of 2%.

It had been 3.5% lower at one stage after Wall Street’s Dow Jones Industrial Average plunged 4.3% – one of its worst ever falls – and Japan’s Nikkei 225 slid 3.7%.

The slump, which has taken the FTSE 100 to a level last seen almost a year ago, comes amid fears of a global recession and worries that Italy and Spain, the eurozone’s third and fourth largest economies, could default on their debt.

This would have a major impact on the banking sector, with Barclays and Lloyds Banking Group off 15.4p at 180.7p and 2.6p lower at 32.4p – half the level the government paid for its stake.

Royal Bank of Scotland fell 5% – off 1.5p at 28.8p – after it took a £733m hit on its exposure to Greece’s debt-laden economy.

The 83% state-owned bank reported a loss of £794m in the six months to June 30, compared with a £1.1bn profit last year.

Outside the top flight, Premier Foods shares were flat at 15.8p after initially falling 21% in the wake of disappointing half-year results.