Royal Bank of Scotland and Lloyds were the heaviest fallers in London on Monday as the sector faced the threat of more action over balance sheets.
While a speech by the chairman of the Independent Banking Commission ruled out a full-scale break-up of the banks, Sir John Vickers mulled plans to ring-fence their retail operations from investment banking and said important institutions should be required to hold more core capital than in the current regime.
The continued uncertainty facing the sector in the UK was reflected in the share prices of the major players, although the FTSE 100 Index held firm with the help of defensive stocks to rise 8.5 points to 5904.8.
The biggest loss in the banking sector was achieved by Royal Bank of Scotland, which fell 1.5p to 43.5p, while Lloyds dropped 1.8p to 65.5p and Barclays fell 3.45p to 297.45p. The latest political turmoil in Ireland, where the coalition government is on the brink of collapse, added to fears over the sector’s exposure to the country and the eurozone debt woes in general.
The other main interest of the session came from the debut of International Consolidated Airlines Group following the merger of British Airways and Iberia. Shares were 286.2p, a rise of more than 1% from the pair’s joint valuation on Thursday, when BA called time on nearly 24 years of trading under its own name.
The stock received an early boost as broker UBS initiated coverage on the new stock with a buy rating and a price target of 360p.
Leisure group Whitbread – up 33p to 1753p – was also the beneficiary of a favourable broker rating after Citigroup upgraded the stock from hold to buy.
Outside the top flight, shares in bank note printer De La Rue fell back after it rejected a new proposal worth £926m from French takeover suitor Oberthur. Shares were down 15.5p at 804.5p.
Attention was also focused on the food production sector after deals involving pizza and biscuits firm Northern Foods and Hovis maker Premier Foods.
Premier’s shares were flat at 22.4p after selling its Quorn and Cauldron meat-free business to a private equity consortium for £205m. Meanwhile Northern Foods shares jumped 16% or 10.25p to 73.25p after it agreed a £342m takeover by the owner of Harry Ramsden’s restaurants.