FTSE 100 close: Soft Lloyds Bank results spark sell off as Natwest tumbles after Alison Rose exit

London’s FTSE 100 was dragged down today by investors ditching shares in Britain’s biggest banks after Lloyds posted a soggy set of results that dampened market sentiment.

The capital’s premier index fell 0.19 per cent to 7,676.88 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, climbed 0.19 per cent to 19,186.54 points.

A poor set of second quarter earnings out this morning from Lloyds Bank, the UK’s largest mortgage lender, forced the bank’s share price down 1.66 per cent and to close to the bottom of the FTSE 100.

The lender said profits before tax contracted 29 per cent in the three months to June to £1.6bn, down from £2.3bn in the previous quarter. Analysts thought profits would reach £1.7bn. On an annual basis, profits were mostly flat.

Lloyds sounded the alarm on the UK economy in fresh forecasts, compelling the lender, which also owns Halifax, to set aside £419m in provisions to cope with an expected uptick in customer defaults.

Lloyds’s profit miss “was driven by higher impairment charges on updated macroeconomic assumptions, which we believe was the course of action given growing uncertainty,” Tomasz Noetzel, banking analyst at Bloomberg Intelligence, said.

Traders have been gearing up for the UK’s big banks to post tens of billions of pounds of profits during second quarter earnings season. The sector has been boosted by the Bank of England hiking interest rates aggressively to tame inflation.

However, Lloyds’s profit miss suggests the big players’ results could be dogged by higher loan-loss provisions. Mortgage demand is also sagging in response to tighter credit conditions.

Natwest tumbled over 3.74 per cent and to finish bottom of the FTSE 100. Its chief Alison Rose in the early hours of this morning stepped down after she revealed she was the source that informed the BBC’s inaccurate report that Nigel Farage had his Coutts bank account blocked for financial reasons, which is also likely to have impacted the share price.

HSBC was slightly lower. Barclays reversed losses to finish in the black.

Aerospace giant Rolls Royce rocketed to second of the FTSE 100, advancing more than 20 per cent after it bumped its profit forecasts off the back of increased air travel demand. Ocado topped the index, taking its year to date gains to nearly 60 per cent.

Durex maker Reckitt was among the worst performers on the premier index, dropping more than one per cent, despite smoking sales expectations.

Pound sterling jumped 0.21 per cent against the US dollar.

Oil prices dropped around 0.5 per cent.