UK high street lenders whipsaw on muddled day of trading in the City

The UK’s biggest high street lenders whipsawed in the City today after giving up morning gains that initially boosted London’s top indexes.

The capital’s premier FTSE 100 index closed 0.53 per cent higher at 7,425.61 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dipped 0.27 per cent to 20,437.77 points.

Britain’s biggest mortgage lender, Lloyds, lifted its forecasts for profits for the year ahead today, prompting investors to flood into banking stocks during early exchanges.

Despite the lender warning the cost of living squeeze may lead to a rise in defaults caused by borrowers having less capacity to service debts, Lloyds’s shares rose 2.66 per cent, making it the second biggest riser on the FTSE 100 in the morning, before finishing 0.25 per cent lower.

Rival banks initially followed. Britain’s biggest bank, HSBC, which said on Monday profits shrank 31 per cent over the last year, was at one point the biggest riser on the premier index, before losing momentum to close up 2.63 per cent.

Now privately owned for the first time since it was bailed out during the financial crisis in 2008 NatWest, formerly RBS, advanced 0.64 per cent.

Barclays, which posts first quarter results today, lost 0.74 per cent.

The prospect of the Bank of England pushing through with more rate hikes in response to a 30-year high inflation rate of seven per cent has added to tailwinds strengthening the banking sector.

The pound weakened 0.1 per cent against the dollar to buy $1.2557.