Natwest and Lloyds shares lead FTSE 100 rally after bruising week
Natwest led a rally across Britain’s banking giants on Monday morning as lenders patched their wounds after a bruising week on the stock market.
The bank topped the FTSE 100’s risers at the starting bell, gaining over four per cent in early trading to 603.60p. Barclays was shortly behind, advancing over 2.5 per cent to 465.75p and Lloyds nearly two per cent to 102.15.
Asian-focused lenders HSBC and Standard Chartered were also on the march, each gaining around two per cent.
“For the FTSE 100, gains were led by some of the stocks which had been under pressure last week, such as data providers and the banks, both of which were caught up in the AI disruption debate,” Richard Hunter, head of markets at interactive investor said.
London’s blue-chip index just 0.3 per cent to 10,474.84p in early trading.
Despite a two per cent jump Monday morning, the FTSE 350 bank index was still struggling with a four per cent drop into the red.
Bank sell-off was ‘overreaction’
It comes after Natwest felt the heat after opening its wallet to its largest deal since the global financial crisis, snapping up wealth manager Evelyn Partners for £2.7bn.
Markets raised concern the bank had overpaid and were also hit with some unease due to the deal relying heavily on cost synergy to deliver. The bank’s stock fell six per cent in the trading session following the announcement.
On Friday, the bank kicked off a bumper dividend after reaching its highest profit since 2008, but this still failed to excite markets with the firm falling around four per cent.
Meanwhile, Barclays was hit by a two per cent slump on Tuesday, despite breezing past profit expectations and kicking off plans to distribute £15bn to shareholders.
“It was interesting that we saw such a sharp drop for several banks last week, which is perhaps a reflection of how strongly they have performed, leaving them vulnerable to profit-taking,” Chris Beauchamp, chief market analyst at IG, told Morning Wire.
“But the big banks (save for HSBC) still aren’t really expensive, with plenty of room for further growth. This looks like an overreaction, but one that investors should be pleased to see, since it helps reset the sector rally without it becoming too frothy.”
Elsewhere on the FTSE 100 this morning, Babcock – a key support for the UK’s nuclear submarine fleet – enjoyed an over two per cent surge after rumours broke that the UK was weighing a hike to defence spending.
Sir Keir Starmer is mulling meeting the existing target of three per cent of GDP spent on defence earlier than expected, according to the BBC. The target was initially pencilled in for the end of the next Parliament.
Melrose was also up over two per cent on the news, with BAE shortly behind up 1.5 per cent.