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RBS buoyancy fails to banish political gloom

SHARES in Royal Bank of Scotland leapt 11 per cent after the state-backed lender smashed expectations with a near doubling in half-year profits.

Other highlights of a busy session included a major takeover deal by BSkyB and talks over the potential combination of Carillion and Balfour Beatty.

Despite the developments, the FTSE 100 Index was stuck in a narrow trading range, down 29.9 points at 6791.6. The pound was also relatively flat against the US dollar, at 1.70, and the euro, at 1.26, after the first estimate of GDP for the second quarter of 2014 met expectations with a rise of 0.8 per cent.

Mark Priest, a senior trader at ETX Capital, suggested political uncertainty may have been behind the muted end to the week. He said: "There's uncertainty out there in Ukraine and the market had a bit of an exit move."

A number of bank results are due next week but RBS jumped the gun when it revealed its half-year profits nearly doubled to £2.65 billion.

Chief executive Ross McEwan said the results showed the underlying strength of the business, but warned there remained "bumps in the road ahead" as it continued to deal with scandals of the past and dispose of toxic assets.

RBS shares finished a strong session 35.4p higher at 364.2p. Barclays added 3.6p to 218.1p and Lloyds Banking Group rose 0.8p to 74.8p ahead of the pair's own half-year figures next week.

BSkyB dropped more than five per cent or 50.5p to 874.5p after it confirmed a deal with 21st Century Fox to buy all of Sky Italia for £2.45 billion and take a 57.4 per cent interest in Sky Deutschland for £2.9 billion.

The move will give BSkyB 20 million customers and control of three of Europe's four biggest markets, although the placing of new shares to pay for the acquisition meant the stock led the list of FTSE 100 fallers.

Elsewhere in the top flight, shares in Vodafone were two per cent or 4.2p higher at 202.1p after an update showed a 4.2 per cent fall in first quarter revenues.

This was steeper than the 3.5 per cent decline a year earlier but the company is hopeful that it will see better trading in its European markets.

In the FTSE 250 Index, shares in Balfour Beatty and Carillion jumped by as much as 9 per cent after the construction firms confirmed talks over a potential merger. Balfour rose 21p to 253.1p and Carillion lifted 24.3p to 362.8p, valuing the two companies at £3.3 billion and meaning any tie-up would create a company large enough to go into the FTSE 100 Index.

The biggest risers on the FTSE 100 were Royal Bank of Scotland up 35.4p at 364.2p, Anglo American up 54.5p at 1639.5p, Pearson up 31p at 1132p and Vodafone up 4.2p at 202.1p. The biggest fallers were BSkyB down 50.5p at 874.5p, GlaxoSmithKline down 46.5p at 1423p, Petrofac down 25p at 1127p and Rexam down 10.5p at 513p.

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