Bidding war for state’s banking assets boosts FTSE 100 as financials rally
BANKS lifted Britain’s top shares yesterday, with Royal Bank of Scotland and Lloyds Banking Group top performers on reports that a new bid vehicle will seek to buy British banking assets.
The FTSE 100 index was up 90.63 points, or 1.8 per cent, at 5,105.45, rising for a third consecutive day. It closed up 49.82 points, or one per cent, on Wednesday.
Banks were among the biggest gainers, led by state-backed Lloyds Banking Group and Royal Bank of Scotland, up 4.3 and 4.0 per cent respectively after reports that two senior British banking figures have joined forces to back a new bid vehicle which will list on the London stock market and look to purchase British banking assets.
Lloyds was also helped by a Bank of America Merrill Lynch note, which reiterated its stance that the Lloyds share price would double over the next two years.
Fears over the bank sector’s exposure to Europe’s sovereign debt crisis were also soothed as European supervisors shored up some confidence in the stress tests they are imposing on lenders.
“A number of factors have combined to improve risk appetite over the past few days,” said Michael Hewson, analyst at CMC Markets.
“As far as the UK is concerned there is little concern about UK banks as they have already passed much more stringent tests, which had been previously done by the UK authorities some time ago.”
Meanwhile, Credit Suisse raised its weighting on European banks to benchmark from 10 per cent underweight in a global equity strategy note on Wednesday.
Adding to bullish sentiment, US peer State Street increased its profit forecast on Wednesday.