U.K., Irish Stocks Fall; Bank Shares Drop as RBS Sells Assets
By Sarah Jones
Nov. 3 (Bloomberg) -- U.K. and Irish stocks fell to the lowest level in more than four weeks as Royal Bank of Scotland Group Plc announced plans to sell its insurance division and some branches after an agreement with the European Union to permit state aid.
RBS lost 7 percent, extending yesterday’s 7.8 percent slump, after agreeing to a 25.5 billion-pound ($41.6 billion) injection from the U.K., increasing the government’s stake to 84.4 percent. Allied Irish Banks Plc and Bank of Ireland Plc tumbled more than 12 percent in Dublin. Xstrata Plc and Kazakhmys Plc led a sell-off in mining companies as copper fell.
The benchmark FTSE 100 Index sank 67.29, or 1.3 percent, to 5,037.21, the lowest close since Oct. 5. The FTSE All-Share Index lost 1.4 percent and Ireland’s ISEQ Index dropped to a three-month low, falling 2.1 percent.
“The story of the banks is far from over,” said Keith Bowman, a London-based equity analyst at Hargreaves Lansdown. RBS’s announcement “certainly raises some questions overall of what the EU’s remit is. One thing investors hate is uncertainty and it does create an extra element of uncertainty in the wider EU banking sector.”
The FTSE 100 last week capped its worst weekly sell-off since an eight-month rally started in March as concern mounted that gains may have outpaced prospects for earnings growth. The gauge has still surged 43 percent since reaching a six-year low on March 3.
RBS Retreats
RBS tumbled 7 percent to 35.93 pence. The government’s plan to inject more money into the U.K.’s largest government- controlled lender pushes its investment to 45.5 billion pounds, making the rescue the most expensive bank bailout in the world.
The increased aid will boost the state’s stake to 84.4 percent from 70 percent after restructuring talks with the European Commission, the European Union’s executive arm. RBS said it will put 282 billion pounds of assets into the government’s insurance program, less than previously announced.
Allied Irish Banks and Bank of Ireland, which have received 7 billion euros ($10.3 billion) from the Irish government, slumped 14 percent to 1.45 euros and 12 percent to 1.41 euros, respectively.
Allied Irish Chairman Dan O’Connor last week said the bank could face “serious consequences” from its negotiations with Europe.
Lloyds Banking Group Plc rallied 2.7 percent to 87.33 pence as Britain’s largest mortgage lender announced plans to raise 21 billion pounds in the country’s biggest rights offering, denying the government majority control.
‘Soak Up’ Cash
“That’s going to soak up a lot of cash, not just for Irish banks, but for European banks,” said Oliver Gilvarry, head of research at Dolmen Securities in Dublin.
HSBC Holdings Plc, Europe’s largest bank, lost 3.3 percent to 667.5 pence. Barclays Plc fell 2 percent to 323.45 pence. Britain’s second-largest bank said its head of retail and commercial banking, Frits Seegers, resigned after Barclays handed control of his commercial lending unit to President Robert Diamond.
The European Commission today said losses at financial institutions may total as much as 400 billion euros and the industry remains “fragile.”
Xstrata, the world’s fourth-largest copper producer, dropped 2 percent to 903 pence. Kazakhmys, Kazakhstan’s biggest Producer of the metal, slid 1.6 percent to 1,120 pence. BHP Billiton Ltd., the world’s largest mining company, dropped 2.3 percent to 1,650.5 pence.
Copper declined in London as the dollar strengthened and Australia’s second interest-rate increase in a month fanned concern about the removal of economic stimulus measures.
The contract for three-month delivery fell as much as 2.8 percent to $6,372.25 a metric ton on the London Metal Exchange.
Aviva Plc retreated 2.5 percent to 379.3 pence. The U.K.’s biggest insurer by market value sold 63.5 million shares in its Dutch insurance unit, Delta Lloyd, at 16 euros each. The company had sought 15.50 euros to 19 euros a share.
-- With assistance from Dara Doyle in Dublin. Editors: Roger Neill, Andrew Rummer.
