Lloyds on FTSE loserboard over tests on capital - London Report

BRITAIN’S top equity index fell yesterday, weighed down by financials after Lloyds only narrowly passed a regulatory health check of Europe’s banks.

The FTSE 100 index fell 0.4 per cent to 6,363.46 points, after managing a slight rebound last week from 15-month lows touched earlier in October.

The index has come down from a more than 14-year peak of 6,904.86 points at the start of September.

Growth sensitive “cyclical” stocks were the biggest fallers, with financials taking more than 15 points off the index, while oil and gas stocks also weighed as Brent crude oil fell below $85 a barrel.

“The cyclicals are getting hit, and with the turmoil of the last few weeks, we’ve still got some turbulence to come,” Zeg Choudhry, managing director at Lontrad, said.

“The way the market is swaying today is looking dangerous. I think we’ve still got a couple of hundred points of downside on the FTSE.”

Lloyds was among the worst-performing FTSE 100 stock in percentage terms, falling 1.8 per cent. The bank only just passed a test to determine whether it had enough capital to weather another economic crash, calling into question when it will resume paying dividends.

However, it rallied off its lows ahead of results due today.

Other British lenders fared relatively well in Europe-wide stress tests, according to results released on
Sunday, but their shares drew profit taking yesterday. In comparison, one in five of the Eurozone’s top lenders failed ECB health checks at the end of last year, but most have since repaired their finances, the European Central Bank said on Sunday.

Lloyds was one of the most heavily traded stocks on the FTSE 100 relative to its average, trading 1.6 times its 90-day average volume.

“Large numbers of investors are involved in Lloyds and are looking for them to start paying a dividend at some point, but the more money that is needed to bolster their balance sheet, the less there is for dividends,” Manoj Ladwa, the head of trading at TJM Partners, said. “Especially when the UK seems to be moving ahead of Europe’s economy, the expectation is that UK banks would’ve performed better than European ones. But Lloyds is a concern.”

Aggreko fell 2.4 per cent, which traders attributed to a profit warning by fellow emergency-power supplier APR Energy, which is not in the FTSE 100 index, and which fell 6.6 per cent.