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Banks cap FTSE gains as Lloyds suffers mis-selling costs
by Chris Marshall on Oct 29, 2013 at 09:49
A £440 million third quarter loss for Lloyds (LLOY.L), which was hit by more mis-selling costs, ensured losses for bank shares on Tuesday morning, in contrast to an otherwise buoyant FTSE 100.
Shareholders appeared to be little moved by Lloyds’ assertion that it has ‘commenced discussions with the regulators regarding… future dividend payments,’ selling shares after the bank revealed another £750 million of charges for compensation customers for mis-selling PPI loan insurance.
The part state-owned bank did, however, announce further efforts to ditch bad assets with 'non-core' assets falling £6.5 billion to £76 billion. The net interest margin, a measure of profitability, improved to 2.17% for the quarter.
Mike Trippitt, analyst at Numis, noted the bank’s ‘strong underlying performance, offset by further PPI provisions and losses on asset disposals,’ but nonetheless reduced his rating on the shares to ‘hold’ from ‘add’, keeping his 85p target price.
Having gained nearly 100% over the past year, Lloyds dropped 2.2% to 77.7p.
Standard Chartered (STAN.L), the emerging markets focused bank, was also down after reporting 'a low single digit percentage' decline in third quarter income compared with the third quarter of 2012. This was expected by analysts and shares fell 1.3% to £15.13.'Underperformance this year has more to do with the asset quality risks from a slowing Asia, and on that front STAN reports stable asset quality trends and early alert indicators' noted Nomura analyst Chintan Joshi. He said the bank's valuation was currently 'attractive'.
European banks in general were faring poorly, after financial updates from Swiss bank UBS and Germany’s Deutsche Bank. RBS (RBS.L) fell 2.4% to 359p ahead of its own quarterly update on Thursday.
Another less popular FTSE mainstay provided better news for investors: BP (BP.L).
The oil giant, which in contrast to soaring Lloyds is only up 5% over 12 months, topped the blue chip index after beating forecasts with third quarter earnings of $3.7 billion and hiking its dividend.
The out-of-favour company increased its quarterly dividend from 9 to 9.5 cents, which analysts noted put the shares on a yield of 5.2% compared with 5% for rival Shell.
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