Bank stocks ruffle the FTSE 100 as investor sentiment is hit by shake-up

THE FTSE 100 briefly dipped below 5,000 for the first time in over a month yesterday, as banking stocks were hit by the shake-up of Royal Bank of Scotland (RBS) and Lloyds Banking Group.<br /><br />Royal Bank of Scotland was the worst hit of the five large-cap banks, dipping by 15 per cent in early trading. <br /><br />It regained some ground as the day wore on, closing down by seven per cent at 35.9p &ndash; the biggest loser on the index &ndash; having seen double the average volumes traded over the course of the day.<br /><br />At the other end of the scale, gaining more than any other large-cap stock, was Lloyds Banking Group, which has fared better than RBS in terms of its treatment by Brussels, analysts said.<br /><br />Lloyds said it was launching a &pound;13.5bn rights issue at a price no lower than 15p.<br /><br />Sources expect the eventual price of the rights shares to be around 30-35p but yesterday Lloyds indicated&nbsp; it would take a couple of weeks before it decided on the level.<br /><br />The bank said it wanted to first get the &pound;7.5bn issue of contingent convertible stock out of the way before pricing the new equity. Around 2.8m shareholders will have to decide whether to take up their rights to new shares in the issue, or whether to sell them in the market. Lloyds gained three per cent to close at 87.33p.