Bloomberg News

U.K. Stocks Rally, Led by Rebound in Banks; RBS Advances

August 03, 2012

U.K. stocks climbed, extending the FTSE 100 (UKX) Index’s biggest-weekly gain in almost a month, led by a rebound in financial companies after Royal Bank of Scotland Group Plc (RBS) reported earnings.

RBS, Britain’s biggest taxpayer-owned lender, added 5.6 percent. Barclays Plc (BARC) and Aviva Plc (AV/) also increased, rallying at least 6 percent. Kazakhmys (KAZ) Plc and Vedanta Resources Plc (VED) advanced with copper.

The benchmark FTSE 100 rose 124.98 points, or 2.2 percent, to 5,787.28 at the close in London, extending the gauge’s weekly advance to 2.8 percent. The broader FTSE All-Share Index also climbed 2.2 percent, while Ireland’s ISEQ Index added 0.9 percent.

“Given all of the distractions, the fact that RBS continues to edge in the right direction at all is of some comfort to investors,” said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers in London. “The bank has moved away from the government’s emergency loans, whilst its overall financial health has undoubtedly improved.”

Stocks extended gains after a U.S. jobs report beat economists’ forecasts. Payrolls increased 163,000 in July following a revised 64,000 rise in June, Labor Department figures showed today in Washington. The median economist forecast was for a gain of 100,000.

The FTSE 100 tumbled yesterday, led by a selloff in financials, after European Central Bank President Mario Draghi damped speculation he would take immediate steps to support the economy. The FTSE 100 has still climbed 10 percent from this year’s low on June 1.

RBS rallied 5.6 percent to 216 pence after reporting a 22 percent decline in operating profit to 650 million pounds ($1 billion) as revenue from its markets unit slipped. That was in line with the 649 million-pound median analyst estimate in a Bloomberg survey.

“We have continued to make the bank safer and stronger as we clean up problems of the past,” Chief Executive Officer Stephen Hester, 51, said in a statement. “In a difficult moment for banks it is more essential than ever to drive through these changes.”

Hester has cut assets by more than 800 billion pounds, eliminated 36,000 jobs and scaled back RBS’s securities and Irish units since he took over from Fred Goodwin when the bank was rescued in 2008.

Barclays climbed 5.6 percent to 171.35 pence after tumbling 3.6 percent yesterday. Lloyds Banking Group Plc rose 4.2 percent to 30.61 pence, while HSBC Holdings Plc (HSBA) gained 4.1 percent to 560.5 pence.

Insurers Gain

Insurance companies also advanced after France’s Axa SA, Europe’s second-largest insurer, reported first-half operating profit that topped analyst estimates.

Aviva led gains in insurers, climbing 7.4 percent to 306.2 pence. Prudential Plc (PRU) rose 6.1 percent to 791.5 pence and Legal & General Group Plc (LGEN) gained 2.7 percent to 130 pence.

Kazakhmys jumped 6.6 percent to 723.5 pence as copper led base metals higher on the London Metal Exchange. Vedanta Resources rose 5.9 percent to 954.5 pence and Antofagasta Plc (ANTO), which owns mines in Chile, increased 4.6 percent to 1,089 pence.

International Consolidated Airlines Group SA paced declining shares, falling 5.2 percent to 151 pence the parent company of British Airways said it will probably record a “small operating loss” for the full year following costs related to its Spanish arm Iberia. The company had earlier said it would break even.

The carrier reported a second-quarter operating loss of 42 million euros ($51 million) versus a year-earlier profit of 134 million euros.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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