Commitment to UK banking industry shake-up hits stocks

UK banking stocks lost ground today after British business secretary Vince Cable said proposals for a radical industry shake-up would be accepted in full.

Lloyds and Barclays were among the top fallers after confirmation they will be forced to implement the Independent Commission on Banking’s (ICB) reforms.

The FTSE 100 Index dropped 4.9 points to 5382.6 despite guarded optimism that EU leaders would today make progress towards raising an additional €200bn to boost its bailout fund.

A slightly stronger start on Wall Street failed to improve sentiment in London. The Dow Jones Industrial Average was up 0.3% after homebuilders reported stronger demand from would-be buyers.

Asian stocks fell overnight as news of the death of North Korea’s leader Kim Jong Il added to uncertainties facing markets in the region.

South Korea’s Kospi index dived by more than 4% at one point while the threat of increased instability meant the Korean won slumped against the traditional safe haven of the US dollar.

Defensive shares topped the risers board as Imperial Tobacco rose 37p to 2362p and pharmaceuticals firm Shire added 29p to 2139p.

But Lloyds fell 3%, or down 0.7p at 23.8p, and Barclays was off 3.3p at 168.2p as Chancellor George Osborne addressed MPs on the Government’s response to the ICB reforms.

Royal Bank of Scotland was down 0.1p at 19.9p after reports yesterday it is considering selling its Hoare Govett stockbroking arm as part of a shake-up of its investment banking arm.

Outside the top flight, shares in grocery delivery firm Ocado slumped to a new low after it forecast full-year profits below market hopes.

Ocado’s sales in the year to the end of November were up 17% on a year earlier but the chain’s profits performance has been held back by capacity constraints at its Hatfield warehouse. Shares were nearly 12% lower, off 8.5p at 62.5p.

Music retailer HMV was another stock to come under pressure after it reported half-year losses of £45.7m in the 26 weeks to October 29 and said like-for-like retail sales fell 13.2% in the seven weeks to December 17. Shares fell 26%, or 1p to 2.9p.

But Yellow Pages owner Yell’s shares rose 7%, or 0.4p at 6.1p, after it said the majority of lenders had agreed to a new deal that will give it increasing room under its banking covenants and buy it some time to reinvent itself online.