Friday 20 September 2019

London market stuck in the red as Royal Bank of Scotland shares fall

The FTSE 100 Index closed down 7.98 points to 7,244.41.

A view of the London Stock Exchange sign in the City of London (Kirsty O'Connor/PA)
A view of the London Stock Exchange sign in the City of London (Kirsty O'Connor/PA)

By Ben Woods, Press Association Chief City Correspondent

The London market failed to bounce back on Friday as investor fears over an impending US fine sent shares in Royal Bank of Scotland tumbling.

The FTSE 100 Index closed down 7.98 points to 7,244.41, with RBS unable to string together a rally despite reporting a bottom-line profit for the first time in a decade.

The lender swung out of the red to report a £752 million profit for 2017, marking a major improvement on the £6.95 billion loss which the lender reported a year ago – one of the biggest since its Government bailout in 2008.

RBS, which is 72% owned by the taxpayer, has yet to reach what is expected to be a multibillion-dollar settlement with the US Department of Justice (DOJ) over mortgage-backed securities sales.

Shares were down 4%, or 13.6p, to 268.4p.

Across Europe, Germany’s Dax and the Cac 40 in France were both 0.2% higher.

On the currency markets, the pound was 0.2% ahead against the US dollar at 1.397, with Bank of England official David Ramsden saying clarity over Britain’s relationship with the European Union after Brexit would boost productivity growth.

Mr Ramsden, deputy governor for markets and banking, warned that uncertainty surrounding the arrangements was causing businesses to put their investment plans on hold.

In a speech at a CBI event in Cambridge, he said: “If there is clarity around the transition and future trading arrangements post-Brexit, this could continue to reduce uncertainty, support business investment and lead to a stronger-than-expected pick-up in productivity growth.”

Versus the euro, sterling was up 0.4% at 1.136.

The price of oil surged 1.5% to $67.12 as traders responded to production slipping in Libya after the El Feel oilfield was shutdown.

Elsewhere in UK stocks, British Airways owner International Consolidated Airlines Group (IAG) dived into the red as traders demanded further signs of underlying growth.

Shares sank 5%, or 35.4p, to 587.2p, despite profits soaring 15% in 2017 as the group benefited from a drop in fuel costs and strengthening economies in North and South America.

The company reported pre-tax profits of 2.78 billion euros (£2.45 billion) for the year to December 31, up from 2.36 billion euros (£2.08 billion) a year earlier.

IAG reaped the benefits of a 5.4% fall in total fuel costs thanks to lower average prices including applied hedges, as well as “efficiencies” from its new fleet and “improved operational procedures”.

Chief executive Willie Walsh said: “All our airlines performed extremely well with their best-ever individual financial results, strong operational performances and commitment to customer service.”

Telecoms giant BT enjoyed a brighter session, finishing as the top flight’s biggest riser after Ofcom stopped short of regulating BT Openreach’s fastest wholesale superfast broadband products.

The group climbed 11.7p to 244.1p, as the communications watchdog drafted new rules which will force BT’s Openreach to open its existing telegraph poles and underground tunnels to rivals hoping to lay cables in areas that might otherwise require digging works.

It means fibre could be installed in some streets in a matter of hours, while the upfront costs could be slashed by up to 50% from around £500 per home to £250.

The biggest risers on the FTSE 100 Index were BT Group up 11.7p to 244.1p, United Utilities up 22.8p to 686.8p, Severn Trent up 56p to 1,766p, British American Tobacco up 105.5p to 4,460p.

The biggest fallers were IAG down 35.4p to 587.2p, Royal Bank of Scotland down 13.6p to 268.4p, Smurfit Kappa down 100p to 2,496p, BAE Systems down 20p to 565p.

PA Media

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