Bank equities drive Footsie lower as Barclays takes hit on profit taking

FTSE:5,544.22 (–158.02) Mid-250:10,479.74 (–293.33) Small Cap:2,858.22 (–42.03)

SHARES IN Barclays were unable to hold on to gains yesterday, as the urge to take profits from October’s wider rally proved too tempting.

Shares in the lender slid 2.9 per cent to 195.3p. Barclays said it did not need to raise fresh equity capital to address more onerous regulatory requirements as it reported a 5 per cent rise in underlying third-quarter profit of £2.4 billion.

The news kept dealers’ attention away from a 22 per cent decline in income at its Barclays Capital investment banking arm, although the performance of its dominant business met forecasts in the context of the turbulence seen across global markets in the period.

“In many ways we think lower expectations are healthy for the bank and now would like to hear from management what the new ‘normal’ might look like,” said Bruce Packard, analyst at Seymour Pierce.

It was also enough to help the bank’s stock outperform its peers, who faced steep losses after leading the preceding week’s strong run higher.

HSBC fell 3.6 per cent to 544.8p. Royal Bank of Scotland was 7.8 per cent weaker at 24.24p. Lloyds Banking was 7.6 per cent softer at 32.49p.

Joshua Raymond, chief market strategist at City Index, said: “Considering [the banking] sector has outperformed over the last four weeks, rising nearly 30 per cent from October 4th through to last Friday’s highs, the sector is prime for profit-taking, particularly when risk appetite takes a back seat much in the way it has done so today.”

Resource stocks were also under heavy pressure, as the momentum provided by hopes that the European Union’s latest debt bailout deal would protect global economic growth faded.

All of the 10 biggest fallers on the index were either resource or financial stocks. Vedanta Resources fell 9 per cent to £12.77, the biggest loss among miners.

Overall, the FTSE 100 fell 2.8 per cent. Drug maker GlaxoSmithKline was up 1.2 per cent to £14.

The renewed selling came after a marginal loss over the previous session.

There was a 27.9 per cent tumble for shares in domestic insurance provider Homeserve, taking the stock to 350p and the bottom of the FTSE 250. – (Copyright The Financial Times Limited 2011)