Barclays and RBS shares climb on banking report while Footsie slides

LONDON REPORT:FTSE: 6,053.44 (–2.31) Mid-250: 11,689.70 (–36.46) Small Cap: 3,285.23 (+6.35)

SHARES IN Barclays and Royal Bank of Scotland topped the FTSE 100 yesterday, as the interim report of the Independent Commission on Banking stopped short of recommending the break up of high street banks.

While Sir John Vickers’ report recommended greater protection for retail deposits from exposure to risk-taking elsewhere within the banks, it did not advocate the formal separation of investment banking operations, as some industry leaders had feared.

Reaction to the report – which also included a call for banks to hold more capital – was positive but more muted in the rest of the sector.

RBS jumped 2.3 per cent to 44.4p. Barclays rallied 2.8 per cent to 305.4p.

Lloyds Banking, which after its acquisition of HBOS at the peak of the financial crisis holds almost one third of the UK’s current accounts, looked relieved that a reversal of that deal was not recommended. Its shares added 0.3 per cent to 62.35p.

HSBC, the UK’s biggest bank by market value, fell 0.7 per cent to 660p. Standard Chartered, the London-listed bank focused on Asian emerging markets, was also 0.7 per cent lower at £16.78.

Bruce Packard, analyst at Seymour Pierce, said: “Although there will be a lot of squealing in public, we expect the bank managements to be secretly quite pleased, because, subject to regulatory minimum standards, banks will still be allowed to transfer capital and liquidity from their UK retail banking activities to the markets and investment banking business.”

Overall, the FTSE 100 was practically unchanged, ending just 2.3 points lower at 6,053.44.

The relief rally in the banking sector was offset by falls for oil majors as crude prices slipped on commodities markets, prompting profit taking after the sector’s lead role in the markets recent run higher. BP fell 0.8 per cent to 474.83p.

Troubled credit card insurer CPP fell a further 14 per cent to 128½p after it issued another profit warning. CPP said its earnings would take a hit from Barclays’ decision to halt sales of some of its products after news of an FSA probe into the company, centred on what CPP referred to as “alleged failings in sales calls with customers”. CPP’s fresh loss was the biggest fall on the FTSE 250. – (Copyright The Financial Times Limited 2011/Bloomberg)